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No. 218^1

United States Circuit Court of Appeals

FOR THE NINTH CIRCUIT

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a Corporation,

LibchiDt,

TFfE STEAMSHIP ''INDIANAPO-
LIS," her engines, boilers, tackle, ap-
])arel and furniture,

Ro^pondenf,

INTERNATIONAL S T E A :M S H I P
C0:MPANY, a Corporation,

Claimanl , CiOss-LihrJanf aiul Cross;-
AppelJant.

SUPPLEMENTAL
APOSTLES ON APPEAL

Upon Appeal from the United States District Court

for the Western District of Washington,

Northern Division.

FILE

E C C I V C g

nrr 1 9 1912

Lowman & Hartford Co., Seattle

uui a« mi

J rK

M r- Ou^

No.

United States Circuit Court of Appeals

FOR THE NINTH CIRCUIT

KITSAP COUNTY TRANSPORTA- "l
TION COMPANY, a Corporation,

Lihrlfijit,

vs.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap-
parel and fnrnitnre,

Rcspoiuleuf,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant, Cros.s-LiheJaiif and Cro-s-.s--
AppcJlaiit.

SUPPLEMENTAL

APOSTLES ON APPEAL

Upon Appeal from the United States District Court

for the Western District of Washington,

Northern Division.

Lowman & Hanford Co., Seattle

INDEX.

Page

Assignment of Errors of International Steam-
ship Co., Cross-Libelant and Respondent. . 11

Bond on Appeal of International Steamship

Company 8

Certificate of Clerk U. S. District Court to Sup-
plemental Apostles on Appeal 14

Citation on Appeal of International Steamship

Co 15

Counsel, Names and Addresses of 1

Names and Addresses of Counsel 1

Notice of Appeal of International Steamship

Company 7

Order Allowing Appeal and Fixing Amount of
Bond on Appeal of International Steamship
Company 5

Petition for Appeal of International Steamship

Company 2

Praecipe for Supplemental Apostles on Appeal . 13

Ill the District Court of the United States for the Western
District of Washington., Northern Division.

KITSAP COUNTY TRANSPOETA-
TION COMPANY, a Corporation,

Libelant y
vs.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, aii-
parel and furniture,

Respandent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Appellant and
Cross-Libehntt.

y No. 4484.

NAMES AND ADDRESSES OF COUNSEL.

IRA BRONSON, Esq.,

614 Colman Building, Seattle, Washington,

Proctor for Cross-Appellant, Cross-Libelant and Claimant.

WM. H. BOGLE, Esq.,

610 Central Building, Seattle, y\^ashington,

Proctor for Libelant and Appellee.

CARROLL B. GRAVES, Esq.,

610 Central Building, Seattle, Washington,

Proctor for Libelant and Appellee.

F. T. MERRITT, Esq.,

610 Central Building, Seattle, Washington,

Proctor for Libelant and Appellee.

L. BOGLE, Esq.,

610 Central Building, Seattle, Washington,

Proctor for Libelant and Appellee.

KITSAP COUNTY TRANSPORTATION COMPANY VS.

In the United States District Court for the Western District of
Washington, Northern Division.— In Admiralty.

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a Corporation,

Libelant,

V No. 4484.

vs.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap-
parel and furniture.

Respondent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Gla/imant and Cross-Lihelant.

PETITION FOR APPEAL.

To the Honorahle Jndge of said Court:

International Steamship Company, a corporation, claimant
and cross-libelant herein, respectfully shows, that on or about
the 6th day of January, 1911, the Kitsap County Transporta-
tion Company, a corporation, exhibited its libel in the District
Court of the United States, for the Western District of Wash-
ington, Northern Division, sitting at Seattle, against the Steam-
ship "Indianapolis," her engines, boilers, tackle, apparel and
furniture, in an action civil and maritime, for damages for
collision between the steamer "Kitsap," owned by said libel-
ant, and the said steamship "Indianapolis," owned by Interna-
tional Steamship Company, a corporation, claimant and cross-
libelant herein, and praying among other things for the relief
set forth in said libel that said steamship "Indianapolis" be
condemned to pay the demand of said libelant and the costs
in said libel mentioned.

That process issued out of said court having been served on
said steamship "Indianapolis," the said International Steam-

THE STEAMSHIP INDIANAPOLIS, ETC. 3

ship Company, as owner and claimant did tliereafter file its
answer to the said libel in the said District Court, and also
file its cross-libel against the said steamer "Kitsap/' owned
by the said Kitsap County Transportation Company, in which
answer and cross-libel said claimant and cross-libelant praj^ed
that the said original libel be dismissed with costs, and that
the said steamer "Kitsap," her engines, boilers, tackle, ap-
parel and furniture, be condemned to pay the demands of said
cross-libelant and the costs upon said cross-libel, as by ref-
erence to said libel, answer and cross-libel will more fully
appear.

That the said cause came on to be heard before the said
Honorable C. H. Hanford, one of the Judges of said District
Court, on or about the 8th day of November, 1911, upon the
pleadings and proof taken in said cause b}^ the respective
parties. And the said Judge on or about the 28th day of
May, 1912, made and filed a memorandum decision on the
merits on said cause whereby it was, among other things, found
and decreed that the collision mentioned in the pleadings re-
sulted from the mutual fault of said steamer "Kitsap" owned
by the said libelant, and the steamship "Indianapolis" owned
by the said cross-libelant, and that there should be a division
of damages resulting from said collision, and that the dam-
ages sustained by said steamship "Kitsap" resulting from said
collision amounted to the total sum of Thirty-two Thousand
Six Hundred Sixty-six and 87/100 (|32,666.87) Dollars, and
that the damages to said "Indianapolis" resulting from said
collision amounted to the total sum of Five Thousand Four
Hundred Fifty-one and 50/100 (|5,451.50) Dollars, and that
on a division of said damages, the said claimant and cross-
libelant should pay to said libelant the sum of Thirteen Thou-
sand Six Hundred Seven and 68/100 (|13,607.G8) Dollars,
but that neither part}^ to said action should be entitled to re-
cover costs therein, and no interest should be allowed either
party.

And it was further found bv said Court that the said libel-

4 KITSAP COUNTY TRANSPORTATION COMPANY VS.

ant as a part of said damage was entitled to damages in the
nature of demurrage for a period of one liundred tbirty-nine
(139) days consumed in making temporary and permanent
repairs tJ said steamer "Kitsap" as a result of said collision,
said damages in the nature of demurrage being fixed at the
rate of Fifty Dollars (|50.00) per day.

\nd after the making and filing of said memorandum de-
cision, and before the entry of final judgment in said cause,
the said C. H. Hanford haying resigned as one of the Judges
of the aboye entitled Court. Thereafter and on the 15th day
of Au-ust, 1912, a final decree in said cause was made and
entered by the Honorable E. E. Cushman, one of the Judges
of said Court, in accordance with said memorandum decision.
And this appellant is adyised and insists that said decree
is erroneous, inasmuch as the said collision did not result from
the mutual fault of said steamer "Kitsap" and the said steamer
"Indianapolis," but did result from the sole fault of said
steamer "Kitsap"; and also inasmuch as the said court refused
to award to the claimant and cross-libelant the full amount
of the damage sustained by the claimant and cross-libelant for
all of the injuries, damage and loss resulting from said col-
lision to the said steamship "Indianapolis," and also for the
reason that said court found and decreed that this petitioner
should pay one-half of the damage found to haye been sustained
by said streamer "Kitsap" as a result of said collision; and also
refused to allow your petitioner its costs in said cause, but
decreed that neither party should recoyer costs herein.

And this appellant for this and other reasons appeals from
the whole of said decree to the United States Circuit Court of
Appeals to be held in the city of San Francisco, California, for
the Ninth Circuit, and prays that the said decree may be modi-
fied and corrected and that this cross-libelant may haye a decree
apainst said Kitsap County Transportation Company, a corpo-
ration, libelant, for the full amount of the damage sustained
by said cross-libelant and resulting from said collision, or such
other decree made as to the said United States Circuit Court

THE STEAMSHIP INDIANAPOLIS, ETC. 5

of Appeals may seem just, and that the said Kitsap County-
Transportation Company, a corporation, be ordered to pay to
the cross-libelant its costs and damages in the premises.

IRA BRONSON,
Proctor for Ch^imant, Cross-Libelant and Cross- Appellant.

Due service of the foregoing petition for appeal is hereby
admitted this 25th day of September, 1912.

BOGLE, GRAVES, MERRITT & BOGLE,

Proctors for Libelant.

Indorsed : Petition for Appeal. Filed in the U. S. District
Court, Western Dist. of Washington, Sept. 26, 1912. Frank
L. Crosby, Clerk. By F. A. Simpkins, Deputy.

In. the United States District Court, for the Western District of
Washington, Xorthern' Division. — In AdmiyaJtij.

KITSAP COUNTY TRANSPORTA- "
TION COMPANY, a corporation,

Lihelant,

vs.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap- > No. 41S4.
parel and furniture.

Respondent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Lihela7it.

ORDER ALLOWING APPEAL.

This cause haying come on to be heard on this 26th day of
September, 1912, upon the petition of International Steamship
Company, a corporation, cross-libelant in the above entitled

6 KITSAP COUNTY TRANSPORTATION COMPANY VS.

cause for an appeal from the decree of tliis court made and
entered on the 15th day of August, 1912, wherein and whereby
it was decreed that the collision mentioned in the pleadings
herein resulted from the mutual fault of the Steamer "Kitsap"
and the Steamship "Indianapolis," and that the damage re-
sulting therefrom should be divided, and upon such division
decreeing that the said Kitsap County Transportation Com-
pany should have and recover from the said claimant and cross-
libelant and the stipulators upon the release bond given herein,
the sum of Thirteen Thousand Six Hundred Seven and 68/100
(113,607.68) Dollars, and that neither party should recover
costs in this action; and it appearing from such petition for
an appeal that the said decree has been duly filed with the
Clerk of this Court, and the Court being duly advised in the
premises ;

IT IS HEREBY ORDERED AND DECREED that the said
International Steamship Company be, and hereby is, allowed an
appeal from said decree as aforesaid, and that the appeal bond
to be given on said appeal be fixed at the sum of Two Hundred

and Fifty Dollars.

EDWARD E. CUSHMAN,

United States District Judge.

O. K. Bogle, Graves, Merrit & Bogle, Proctors for Libelant.

Indorsed: Order .Vllowing Appeal. Filed in the U. S.
District Court Western Dist. of Washington, Sept. 26, 1912.
Frank L. Crosby, Clerk. By F. A. Simpkins, Deputy.

THE STEAMSHIP INDIANAPOLIS^ ETC. 7

In the United States District Court, for the Western District of
Washington, Northern Division. — In Admiralty.

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a Corporation,

Libelatit,

vs.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap-
parel and furniture,

Respondent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Libelant.

y No. 4484

NOTICE OF APPEAL.

I'o Kitsap County Transportation Company, a Corporation,
Libelant; and to Bogle, Graves, Merritt d Bogle, Proctors
for Libelant; and to Frank L. Crosby, Clerk of said Court:

You, and each of you, will please take notice that the Inter-
national Steamship Company, a corporation, claimant and
cross-libelant herein, hereby appeals from the final decree made
and entered herein on the 15th day of August, 1912, in favor of
the libelant and against this claimant and cross-libelant, and
the stipulators for the release of the steamship "Indianapolis,"
for the sum of Thirteen Thousand Six Hundred Seven and
68/100 (113,607.68) Dollars, Avithout costs, and from each and
every part of said decree, to the next United States Circuit
Court of Appeals, for the Ninth Circuit, to be holden in and
for said Circuit at the city of San Francisco, State of California.

Dated at Seattle, Washington, September 25th, 1912.

IRA BRONSON,

Proctor for Claimant and Cross-Libelant.

KITSAP COUNTY TRANSPORTATION COMPANY VS.

Due service of the foregoing notice of appeal, after the filing
of the same in the office of the Clerk of the above entitled Court,
is hereby admitted by the Proctors for Libelant this 25th day of
September, 1912.

BOGLE, GRAVES, MEKRITT & BOGLE,

Proctors for Libelant.

Indorsed: Notice of Appeal. Filed in the U. S. District
Court, Western Dist. of Washington, Sept. 26, 1912. Frank L.
Crosby, Clerk. By F. A. Simpkins, Deputy.

In the United States District Court, for the Western District of
Washington^ Northern Division.— In Admiralty.

KITSAP COUNTY TRANSPORTA- ^
TION COMPANY, a Corporation,

Libelant,

vs.

I No. 4484.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap-
parel and furniture,

Respojident,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Lihelant,

BOND ON APPEAL.

KnoiD All Men hy these Presents:

That we, INTERNATIONAL STEAMSHIP COMPxVNY, a
corporation, claimant and cross-libelant, as principal, and
Joshua Green of Seattle, Washington, and Frank E. Burns of
Seattle, Washington, as sureties, are held and firmly bound
unto the Kitsap County Transportation Company, a corpora-
tion, in the sum of Two Hundred and Fifty (|250.00) Dollars,

THE STEAMSHIP INDIANAPOLIS^ ETC. 9

lawful money of the United States to be paid to said KITSAP
COUNTY TRANSPORTATION COMPANY, a corporation,
to which payment well and truly to be made, we bind ourselves,
our heirs, executors, administrators and successors, jointly
and severally, by these presents.

Sealed with our seals and dated at Seattle this 25th day of
September, 1912.

WHEREAS, the said International Steamship Company, a
corporation, has lately appealed to the United States Circuit
Court of Appeals for the Ninth Circuit from the decree made
and entered in the above entitled cause on the loth day of
August, 1912, and having duly filed its assignment of errors
in the office of the Clerk of said Court, and having filed its
petition for such appeal which was duly allowed by said Court,
and a citation was duh" issued in said cause on such appeal.

NOW, THEREFORE, the condition of this obligation is
such that if the above named International Steamship Com-
pany, a corporation, cross-appellant in said cause, shall prose-
cute said appeal with effect and pay all costs that may be
awarded against it as such cross-appellant if the appeal is not
sustained, and shall abide by, fulfill and perform whatever
judgment and decree may be rendered by the United States
Circuit Court of ApjDeals for the Ninth Circuit, in this cause,
or on the mandate of said Court by the Court below, then this
obligation shall be void, otherwise the same shall be and remain
in full force and effect.

INTERNATIONAL STEAMSHIP COMPANY.
B}' Joshua Green, President.

C. H. J. Stoltenberg, Secretary.
JOSHUA GREEN,
FRANK E. BURNS.
Sealed and delivered, and taken and acknowledged this
25th day of September, 1912, before me.
(Seal) ROBERT W. REID,

Notary Public in and for the State of Washington,
residing' at Seattle.

10 KITSAP COUNTY TRANSPORTATION COMPANY VS.

United States of America,
State of Wasliington,
County of King — ss.

JOSHUA GREEN and FRANK E. BURNS, being duly
sworn, each for himself and not one for the other, deposes and
says : That he resides in the Western District of Washington ;
that he is worth the sum of Five Hundred (fSOO.OO) Dollars
over and above all his just debts and liabilities, and exclusive
of property exempt from execution.

JOSHUA GREEN,
FRANK E. BURNS,

Sworn to this 25th day of September, 1912, before me.
(Seal) ROBERT W. REID,

Notary Public in and for the State of Washington,
residing at Seattle.

The foregoing bond approved as to form, amount and suf-
ficiency of sureties.

BOGLE, GRAVES, MERRITT & BOGLE,
Proctors for Kitsap County Transportation Company,
Appellant and Appellee.

Indorsed: Bond on Appeal. Filed in the U. S. District
Court, Western Dist. of Washington, Sept. 26, 1912. Frank
L. Crosby, Clerk. By F. A. Simpkins, Deputy.

THE STEAMSHIP INDIANxiPOLIS, ETC.

In the District Court of the United States for the Western
District of W ashington. Nortlierri' Division.

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a Corporation,

Libelant,

vs.

THE STEAMSHIP "INDIANAPO-
LIS,'' her engines, boilers, taclvie, ap-
parel and furniture,

Respondent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Libelant. ^

> No. 4484.

ASSIGNMENT OF ERRORS ON BEHALF OF CROSS-
LIBELANT AND RESPONDENT.

Comes now the above named International Steamship Com-
pany, a corporation, cross-libelant and respondent in the above
entitled cause, and says that in the record and proceeding in
said cause, and in the decree made and entered therein on the
15th day of August, 1912, there are manifest errors in the fol-
lowing particulars :

That the Court erred in finding and decreeing that the col-
lision mentioned in the pleadings between the Steamer "Kitsap"
and the Steamship "Indianapolis'' resulted from the mutual
fault of said Steamer "Kitsap" and said Steamship "Indianapo-
lis," and in refusing to find and decree that said collision re-
sulted from the sole fault and negligence of the said Steamer
"Kitsap."

That the Court erred in finding and decreeing in said cause
that the damage resultino- from the collision mentioned in the

12 KITSAP COUNTY TRANSPORTATION COMPANY VS.

pleadings therein, should be divided, and that the libelant
should recover one-half of the damage sustained by it and re-
sulting from said collision ; and that the cross-libelant and
respondent should pay to the libelant one-half of the damages
to said Steamer "Kitsap" found to have resulted from said
collision, and in refusing to award to the cross-libelant and re-
spondent all of the damages resulting to the Steamship "In-
dianapolis" from said collision.

III.

That the Court erred in alloAving to the libelant in any event
any part of the sum of Twelve thousand seven hundred twelve
and 20/100 (|12,712.20) dollars for the salving of the Steamer
"Kitsap."

IV.

That the Court erred in not awarding to the cross-libelant
and respondent the full damages sustained by the cross-libelant
and respondent for all of the injuries, demurrage and loss re-
sulting from said collision to said Steamship "Indianapolis."
Wherefore, the cross-libelant and respondent prays that said
decree may be reversed, modified and corrected in the matters
and things above set forth, and that such decree may be entered
herein as shall meet with the approval of this Honorable Court
and as shall do justice between the parties herein.

IRA BRONSON,
Proctor for Cross-Libelant and Respondent,
International Steamship Company.

Due service of the foregoing Assignment of Errors is hereby
admitted this 25th day of September, 1912.

BOGLE, GRAVES, MERRITT & BOGLE,

Proctor for Libelant.

Indorsed: Assignment of Errors on Behalf of Cross-Libel-
ant and Respondent. Filed in the U. S. District Court, Western
Dist. of AVashington, Sept. 26. 1912. Frank L. Crosby, Clerk.
By F. A. Simpkins, Deputy.

THE STEAMSHIP INDIANAPOLIS, ETC.

In the District Court of the United States for the Western
District of Washington. Northern Dimsion.

KITSAP COUNTY TRANSPORTA-
TION CO.,

Liljelant,

vs.

STEAMSHIP "INDIANAPOLIS," etc..

Respondent,

y No. 4484.

INTERNATIONAL S. S. CO.,

Claimant.

PRAECIPE.

To the Clerk of the Above Entitled Court:

You will please jorepare Supplemental Apostles on Appeal
which shall contain the following records:

Cross-Appellant's Notice of Appeal.

Bond on Appeal.

Petition for Appeal.

Order Allowing Appeal.

Citation on Appeal.

Assignment of Errors.

IRA BRONSON,

Proctor for Cross- Appellant.

Indorsed: Praecipe. Filed in the U. S. District Court,
Western Dist. of Washington, Sept. 26, 1912. Frank L. Crosby,
Clerk. By F. A. Simpkins, Deputy.

KITSAP COUNTY TRANSPORTATION COMPANY VS.

In the District Court of the United States for the ^yestern
District of ^^'ashington. Northern Division.

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a Corporation,

Libelant,
vs.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap- i -^^^^ ^^g^
parel and furniture,

Respondent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Appellant and
Cross- Lihelant.

CLERK'S CERTIFICATE TO TRANSCRIPT OF RECORD.

United States of America,

Western District of Washington — ss.

I, Frank L. Crosby, Clerk of the District Court of the United
States for the Western District of Washington, do hereby cer-
tify the foregoing 16 printed pages, numbered from 1 to 16,
inclusive, to be a full, true and correct copy of the record and
proceedings in the above and foregoing entitled cause, as is
called for by praecipe of Proctor for Claimant, Cross-Appel-
lant and Cross-Libelant, as the same remain of recorri pud on
file in the office of the Clerk of said Court, and that the same,
constitutes the Supplemental Apostles on Appeal from the
order, judgment and decree of the District Court of the United
States for the Western District of Washington, to the Circuit
Court of Appeals for the Ninth Judicial Circuit at San Fran-
cisco, California.

I further certify that I hereto attach and herewith transmit
the original Citation issued in this cause.

THE STEAMSHIP INDIANAPOLIS, ETC.

I further certify that the cost of preparing and certifying
the foregoing Supplemental Apostles on Appeal is the sum of
122.20, and that the said sum has been paid to me by Ira
Bronson, Esq., Proctor for Cross- Appellant, Cross-Libelant and
Claimant.

In testimony whereof I have hereunto set my hand and
affixed my official seal, at Seattle, in said District, this 9th
day of October, 1912.
S^ 4*fi. FRANK L. CROSBY, Clerk.

In- the United States District Court, for the Western District
of Washington, Northern Division. — Di Admiralty.

KITSAP COUNTY TRANSPORTA- 1
TION COMPANY, a Corporation,

Libelant;,

vs.

^ No. 4181.

THE STEAMSHIP "INDIANAPO-
LIS," her engines, boilers, tackle, ap-
parel and furniture.

Respondent,

INTERNATIONAL STEAMSHIP
COMPANY, a Corporation,

Claimant and Cross-Lihelant,

CITATION ON APPEAL.

The President of the United States to Kitsap County Transpor-
tation Company, a corporation, Libelant; and to Bogle,
Graves, Merritt cC- Bogle, its Proctors herein, Greeting:
You are hereby cited and admonished to be and appear
before the United States Circuit Court of Appeals for the Ninth
Circuit, at the City of San Francisco, California, within thirty

16 KITSAP COUNTY TRANSPORTATION COMPANY VS.

days of tlie date hereof, pursuant to an appeal to tlie said Court
duly filed in the Clerk's office of the District Court of the United
States for the Western District of V\'^ashington, Northern Di-
vision, wherein the Interiptional Steamship Company, a cor-
poration, is cross-appellant and you are cross-appellee, then
and there to show cause, if any there be, why the decree of the
District Court of the United States for the Western District of
Washington, Northern Division, in the above entitled cause,
dated August 15th, 1912, should not be reversed or corrected,
and why speedy justice should not be done to the parties in that
behalf.

WITNESS the Honorable Edv/ard E. Cushman, Judge of
the District Court of the United States for the Western District
of Washington, Northern Division, at tlie City of Seattle, Wash-
ington, this 26th day of September, 1912.

EDWARD E. CUSHMAN,
Judge of the United States District Court for the Western

District of Washington.

Due service of the v\'ithin citation after the filing of the same,
in the office of the Clerk of the above entitled Court is hereby
admitted this 25th day of September, 1912.

BOGLE, GRAVES, MERRITT & BOGLE,

Proctors for Libelant.

Indorsed: No. 14S4. In the District Court of the United
States for the Western District of ^Yashington, Northern Di-
vision. Kitsap County Transportation Company, a corporation.
Libelant, vs. The Steamship "Indianapolis," etc.. Respondent.
Citation on Appeal. Filed in the U. S. District Court, Western
Dist. of Washington, Sept. 26, 1912. Frank L. Crosby, Clerk.
By F. A. Simpkins, Deputy. Ira Bronson, Proctor for Claim-
ant and Cross-Libelant, 614-618 Colman Building, Seattle.

IN THE

(Utrrmt (flourt of Appeals

FOR THE NINTH CIRCUIT

KITSAP COUNTY TRANSPOETA-^
TION COMPANY, a corporation,
AppeUimt and Cross- Appellee,

vs.

STEAMSHIP "INDIANAPOLIS,"

her engines, l)oilers, tackle, apparel / ^^- -l^^-
and furnitnre,

Respoyident and Appellee,]

INTERNATIONAL STEAMSHIP
COMPANY, a corporation,

Claimant and Cross- Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT. FOR THE
WESTERN DISTRICT OF WASHINGTON. NORTHERN DIVISION

Brief of Appellant and Cross- Appellee

W. H. BOGLE,
CARROLL B. GRAVES,
F. T. MERRITT,
LAWRENCE BOGLE,
Proctors for Appellant and Cross- A^Dpellee.
SEATTLE. WASHINGTON

In the
United States Circuit Court of Appeals

FOR THE NINTH CIRCUIT

laTSAP COUNTY TRANSPORTA-^
TION COMPANY, a corporation,

A])])('lJ(n)f (dhI Cro^fi-Appcllce,

vs.

STEAMSHIP " INDIANAPOLIS, '^

her engines, boilers, tackle, apparel ^^' ^1^^-
and furnitnre.

Respondent and Appellee,]

INTERNATIONAL STEAMSHIP
COMPANY, a corporation.

Claimant and Cross-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT. FOR THE
WESTERN DISTRICT OF WASHINGTON. NORTHERN DIVISION

Brief of Appellant and Cross- Appellee

STATEMENT OF THE CASE.

This cause comes here on appeal by the Libelant

below, and npon a cross-appeal by Claimant below.

fi'om a judgment rendered in the court i^elow, in

favor of Appellant and Cross- Appellee and against

Appellee and Cross- Appellant in a suit in admiralty
for the recovery of damages caused by a collision
between the Steamships "Kitsap" and "Indianapo-
lis," in Elliott Bay, off the Seattle docks on Decem-
ber 14, 1910.

The libel (Record pp. 4-8) alleges that the Li-
belant was and is a Washington corporation and the
owner of the Steamship "Kitsap" at the time of
the collision, which vessel was used and employed
in transporting passengers and freight between the
City of Seattle, Washington, and other ports and
places upon the waters of Puget Sound and its
tributaries; that the Steamship "Kitsap" was a
wooden vessel of the following registered tonnage:
195 gross tons, and 123 net tons ; that she was 127.5
feet in length over all, had a beam of 22 feet and
a depth of 7.5 feet, and that she was at the time of
the collision stout, staunch and in all respects well
manned, tackled, appareled and appointed, and had
the usual and necessary complement of officers and
men. That the Steamship "Indianapolis" was an
iron or steel American vessel of about 180 feet in
length, and was engaged in transporting freight and
passengers between the City of Seattle, Washing-
ton, and the Citv of Tacoma, Washington.

That on Wednesday, December 14, 1910, at
about 4:35 P. M., the "Kitsap" left her berth on
the south side of Pier 4 in Seattle, on her regular
voyage or run from Seattle to Liberty Bay; that
a dense fog hung over Elliott Bay and the course
of the steamer therein; that she backed from her
berth at a point about opposite Pier 5, and then
went ahead under sIoav bell, with helm hard astar-
board, turning to her course to Four Mile Rock;
her master was at her wheel in the pilot house, and
her mate was on the bridge; a competent man was
on the lookout, and they, as well as the rest of the
crew, who were variously employed in their respec-
tive duties, were faithfully attending thereto.

That the vessel proceeded imder slow bell, regu-
larly soiniding her fog signals, up to the time of the
collision, and every precaution was being taken to
avoid a collision during said time. Shortly after
turning to her course, the fog signals of the "Indian-
apolis" were heard a little forward of the "Kit-
sap's" beam on the port side; that the "Indian-
apolis" was then inbound from Tacoma to the
Colman Dock in Seattle; that the "Kitsap" after
the "Indianapolis' " fog signals were heard on the
"Kitsap," was a considerable distance northerly

from the proper and regular course of the "Indian-
apolis" from the bell-buoy off Duwamish Head to
Colman Dock. That the "Kitsap" proceeded on her
course at a speed of not over three or four miles an
hour, regularly sounding her fog ^Yhistles, and all
hands keeping a sharp lookout, and taking every
precaution against collision, until it appeared that
the "Indianapolis" was getting closer, when the
engines of the "Kitsap" were stopped and alarm
signals immediately sounded ; that under these cir-
cumstances and conditions the "Indianapolis" sud-
denly appeared through the fog a short distance
from the "Kitsap" and on her port side, coming at
a high rate of speed and heading for the port side
of the "Kitsap."

The libel also alleges that the master of the
"Kitsap" at once ordered his engine full speed
astern, which checked all forward movement of the
"Kitsap," but that before she could gather stern-
way, the "Indianapolis," without changing her
course or checking her speed to any apparent extent,
strurk the "Kitsap" on the port side just back of
the pilot house, cutting into the hull of the "Kitsap"
several feet; that the "Indianapolis" backed away
from the "Kitsap," and then put her bow against

the "Kitsap" just forward of the cut, and all the
passengers and crew of the "Kitsap" were, trans-
ferred to the "Indianapolis," and that shortly there-
after the "Kitsap" sank by reason of the injuries
received in such collision, and became and is a total
loss.

The lifiel also alleges that the collision was in
no way due to any fault on the part of the "Kitsap,"
which was carefully operated, nor of her officers or
crew, but was due wholly to the fault of the "Indian-
apolis," in that she was navigated at too great speed
in the fog, close to the docks in the crowded harbor,
where it was known to those in charge of the "In-
dianapolis" that vessels were leaving the docks at
all times; also in that she did not give proper heed
to the fog signals of the "Kitsap," and that she did
not go under the stern of the "Kitsap," as under the
collision rules she should have done; and also in
that she dirl not stop and reverse her engines in
time, as she should have done, and in that she was
in other respects improperly and carelessly navi-
gated.

The libel alleges the damages to the "Kitsap"
in the sum of Fifty Thousand Dollars ($50,000.00).

Upon the filing of the libel on January 6, 1911,
a monition and attachment ^Yas duly issued out of
the said court and delivered to the United States
Marshal, Avho thereafter seized the "Indianapolis"
and made due return of the writ.

The International Steamship Company, Appel-
lee and Cross- Appellant herein, duly appeared and
filed its claim as o^Yner of the "Indianapolis," and
procured her release upon ])ond. Thereafter, Claim-
ant filed an answer to the libel (Record pp. 14-16),
which is practically a denial, either positive or on
information and belief, of the allegations of the
libel, except as to the ownership and size of the
"Kitsap," the size of the "Indianapolis," and the
fact that the vessels were in collision in a heavy fog
at the time and place alleged.

The xippellee, as the owner of the "Indian-
apolis," also filed a rross-libel against the "Kitsap"
(Record pp. 9-11), in which it is alleged that Cross-
Appellant was and is an Oregon corporation, and
the owner of the "Indianapolis,'' which vessel was
used and employed in transporting passengers and
freight between Seattle and Tacoma, Washington;
that the " Indianapolis " at the time of the collision
was stout, stau.nch and in all respects well manned.

tackled, appareled and appointed, and had the usiTtil
and necessary complement of officers and men; that
the "Kitsap" is an American vessel regularly en-
gaged in transporting passengers and freight be-
tween Seattle and other ports on Pnget Sonnd.

The cross-lilxd further alleges that on Deceni-
l)er 1-1, 1910, the "Indianapolis" left her berth at
Tacoma at 3 o'clock P. M. on her regular trip to
^Seattle, running in clear weather until near Du-
wamish Inioy; that near that locality the "Indian-
apolis" sighted a slight fog, whereupon she reduced
her speed, increasing it momentarily as the fog
lifted, Init almost inunediately reducing it upon
sighting a second fog bank ahead ; that said steamer
entered the fog bank under a slow bell, and regular-
ly sounding her fog signals as required by law ; that
her master was at her wheel, her mate upon the
l)ridge, and a com]:>etent man was upon the lookout,
and that each and all were faithfully attending to
their respective duties at all of said times. That
soon after entering the second fog bank the master
of the "Indianapolis" heard the whistles of the
"Kitsap" at a distance off the port bow, and that
shortly after, he heard the whistles nearly ahead
])ut still a considerable distance away, Avhereupon

he caused the engines of the "Indianapolis" to be
stopped. That subsequently he heard the "Kit-
sap's" whistles to starboard, upon which he ordered
half speed astern, and upon again hearing her
whistle and apparently growing nearer ordered full
speed astern. That almost immediately, sighting
the "Kitsap" through the fog, the master of the
"Indianapolis" blew alarm whistles and used all
reasonable methods to avoid collision, notwithstand-
ing which a collision took place, resulting in injury
to the "Indianapolis" and in the sinking of the
"Kitsap."

The cross-libel alleges that the collision and
resulting damage was in nowise due to the fault of
the "Indianapolis," which was carefully and pru-
dently managed, and upon her usual and proper
course to her dock, nor to any fault of her officers
or crew, l^ut that it was wholly due to the fault of
the "Kitsap" in that she was navigating at too great
speed in the fog; in that she did not give proper
heed to the signals of the "Indianapolis," and more
particularly in that, although those in charge of
the "Kitsap" knew that the "Indianapolis" was
coming up to her dock in a dense fog, the "Kitsap"
was navigated upon a course which would twice

carry her between the "Indianapolis" and said
dor-k, that is, it should twice take the "Kitsap"
across the bows of the "Indianapolis."

The damage to the "Indianapolis" is alleged
at the sum of Fifty Thousand Dollars ($50,000.00).

The Libelant answered the cross-libel (Record
pp. 12 and 13), den^dng any knowledge or infor-
mation of the allegations as to the actions of the
"Indianapolis," denying the allegations of care on
the part of the "Indianapolis" and of negligence
on the part of the "Kitsap," as well as the damage
alleged to have i^een sustained by the "Indian-
apolis."

The cause was duly referred by the District
Court to a Commissioner to take and report the
testimony therein; and all evidence in the cause
on behalf of l)oth parties was taken before the
Commissioner, and on October 20, 1911, returned by
him to the court, together with the exhibits offered.
(Rerord p. 431).

The case was argued before Honorable C. H.
Ilanford, Judge of the District Court for the Wes-
tern District of Washington, on November 8, 1911,
upon the evidence taken before the Commissioner

and the exhibits offered. Said Judge thereafter,
and on May 28, 1912, filed a memorandum decision
(Record pp. 432-434), in which he found among
other things, as fo^o^YS: That the "Kitsap" left
her dock at 4:35 P. M., backing away from the
south side of Pier 4, under a slow bell, sufficient to
clear the face of the docks, then reversed and went
ahead cnrviug to starboard, Kutil she came around
on her regular course headed for Four Mile Rock
on the north shore of the harbor. That the "Indian-
apolis" was a much larger vessel than the "Kitsap,"
with a steel hull, and that at 4:33 P. M. she was
coming from Tacoma and near the bell-buoy off
Duwamish Head on the west side of Seattle harbor,
and was running at reduced speed, but that she then
increased to full speed, which was fifteen knots per
hour or approximately fifteen hundred feet per
minute. That from the time the "Kitsap" started
both vessels were giving fog signals by blasts of
their whistles at intervals of from ten to twenty
seconds. That the time of the collision was 4:40
P. M. The Court found the point of collision to be
opposite the slip l^etween the Grand Trunk and
Colman Docks, about 1500 feet from the end of the
docks, and about 10,500 feet from Duwamish Head,

and that it required seven minutes for the "In-
dianapolis" to run this distance from Duwamish
Plead to the point of collision at her maximum
speed.

The Court also found that no attempt was
made on either vessel to avoid the collision by oper-
ating the helm to change her course so that when
the vessels came together they were on converging
lines — the "Kitsap" headed obliquely across the
bow of the "Indianapolis." That the "Indianapo-
lis" rammed the "Kitsap" on her port side in the
vicinity of her pilot house, and cut into her hull
to a depth of a])out seven feet. The Court also
found as a fact, that at the moment of the impact,
both vessels were moving ahead with considerable
momentum, and rejected as untrue all evidence to
the contrary, and found that ])oth vessels were at
fault. The Court found the damage to the "Kit-
sap", from the uncontradicted evidence, to be a
total of $32,666.87, including denuirrage for the
"Kitsap" during the time repairs were being made.
The Court found the damage to the "Indianapolis,"
including demurrage, at a total of $5,451.50, making
a grand total of $38,118.37, which the Court found

should 1)0 divided, and that neither party should
recover costs.

Thereafter, and on August 15, 1912, a final de-
cree in accordance with such memorandum deci-
sion was signed and filed, the same being signed
by Honorable Edward E. Cushman, Judge of said
court. Judge Hanford having resigned as Judge
of said court prior to the entry of a final decree
in the case.

This Appellant took this appeal from the
final judgment on August 15, which appeal was
duly perfected, and the Apostles on Appeal pre-
pared, certified and printed. On September 25,
1912, Claimant and Cross-Libelant also appealed
from the final decree. This cause comes here upon
the appeal of the Libelant and the cross-appeal of
the Claimant from such final decree.

The testimony in this case is voluminous, and
the decision on this appeal will depend largely
on the (onchision this Court reaches from this evi-
dence, as to the fault causing the collision in ques-
tion, and our argument will therefore, consist prin-
cipally of a discussion of the evidence. We will
not at this time point out the evidence we rely

upon for a reversal of the decree of the lo^Yer
court, but Avill try to make a statement of the ma-
terial, admitted or undisputed facts in the case,
and our claim as to the proven facts in dispute,
to aid the court in understanding the issues to be
determined. In our argument, we will refer to the
evidence we claim sustains our position in the case,
and which we rely upon in asking this Court for a
larger decree against the Appellee.

The steamer ''Kitsap" is a wooden vessel of
195 gross tons and 123 net tons. She was 127,5
feet in length over all, and had a beam of 22 feet,
and a depth of 7.5 feet (E. p. 5), and she weighed
about from 125 to 150 tons (R. pp. 69 and 893).
She was owned by the Kitsap County Transporta-
tion Company, a corporation, Libelant herein.

The steamer "Indianapolis" is a steel vessel
(R. p. 415) of about 180 feet in length, 30 feet in
breadth, and 8 feet mean draft, (her depth not
appearing), and weighing about 493 tons (R. pp.
369, 393, 403). She was owned by the International
Steamship Company, Appellee and Cross-Appellant
herein. The "Indianapolis' 'at the time in ques-
tion, was running regularly between Seattle and
Tacoma, and the "Kitsap" was running between

Beattle and Paulsbo on Liberty Bay, an arm of
Puget Sound. Both vessels had regular berths at
docks in Seattle, the berth of the "Indianapolis"
being at the outer face of the Colman Dock, and
the berth of the "Kitsap" just before leaving on
the voyage in question, being on the south side of
Pier 4. The distance between these two piers is
about 700 feet (Libelant's Exhibit J).

The regular course of the "Kitsap" from her
berth at Pier 4 was to back around in front of
Pier 5, and then go ahead, turning to starboard on
to a course direct to Four Mile Rock, which is lo-
cated between West Point and the docks in ques-
tion. The regular course of the "Indianapolis" in
coming from Tacoma, was to come around the bell-
buoy just off Duwamish Head, opposite West Se-
. attle, and then steer to a point between the Colman
Dock and the Grand Trunk Dock, when she would
change her course slightly and run in along the
face of the Colman Dock.

During the afternoon of the day of the colli-
sion, a very dense fog hung over Elliott Bay. The
"Kitsap" left her berth at 4:35 P. M., backing in
front of Pier 5, and then going ahead and turning
to starboard on to her regular course. The "In-

dianapolis" passed the bell-buoy at 4:33 P. M.
The collision occurred at 4:40 P. M. Both vessels
were being operated in the fog after the "Indianap-
olis" passed the bell-buoy, and both were regularly
sounding fog signals. Neither vessel could be seen
from the other until a very short distance apart.
The "Indianapolis" struck the "Kitsap" on her
port bow, just forward of her pilot house, cutting
into her aliout seven feet, and causing her to sink
within about twenty minutes. The "Kitsap" was
afterwards located at a depth of about 238 feet,
and subsequently raised and repaired.

There was no evidence offered by Appellee to
contradict Appellant's testimony as to the amount
of damage sustained by the "Kitsap." The only
question raised by Appellee as to the amount of
damages claimed ])y Appellant, was as to the basis
upon which demurrage should be figured, and as
to the item of $1,500.00 claimed by the Appellant
for damage to the boilers of the "Kitsap" by being
submerged; the Court allowing Appellant only
$50.00 per day demurrage, instead of $103.00 per
day as claimed hy it, and disallowing the item of
$1,500.00 damage to the boilers. Appellee also con-
tests Appellant's right to recover for salvage of the

"Kitsap," which was allowed by the trial court.
Appellant offered no evidence to contradict the
evidence of Appellee as to the damage to the "In-
dianapolis," and the Court allowed such damage,
estimating the demurrage due the "Indianapolis"
on the same basis as it allowed demurrage to the
"Kitsap;" that is, on the basis of the net earnings
of the respective vessels as stipulated in the case.

The questions involved in this statement of facts
and presented here by the Assignment of Errors,
together with the manner in which those questions
are raised upon the record, are as follows:

Appellee will claim that the finding of the
trial court that the "Indianapolis" was at fault
is not sustained by the evidence. Appellant will
claim that this finding is amply sustained by the
evidence, and in fact, that no other finding could
be made under the evidence.

II.

Appellant contends that the finding of the trial
court that the "Kitsap" was at fault is not sus-
tained by the evidence; but that the evidence shows
clearly that the "Kitsap" was not at fault, that

she was operated with all proper care and caution,
in strict accordance with the rules of navigation,
and that the Court erred in finding the "Kitsap"
at fault, and in decreeing that the damages caused
by the collision should be divided.

Appellant's Assignment of Errors Nos. 1, 2,
() and 7 will l^e discussed under this heading.

III.

The Court allowed Appellant only $50.00 per
day demurrage for the "Kitsap" during the period
she was being raised and repaired; while Appellant
claims that it was entitled to demurrage at the rate
of $103.00 per day, being the net charter value of
the Steamer "Hyak," which was employed to take
the run of the "Kitsap" during this period.

Appellant's Assignment of Error No. 3 will
be discussed under this heading.

IV.

Appellant claimed $1,500.00 for non-repairable
damage to the boilers of the "Kitsap" by reason of
the submersion, which the Court refused to allow.

Assignment of Error No. 1 will be discussed
under this heading.

The Court refused to allow an}^ interest to
Appellant on the sums expended by it in making
repairs to the "Kitsap," or any interest prior to
the date of the decree upon amounts due it.

Assignment of Error No. 5 will be discussed
under this heading.

SPECIFICATIONS OF ERROR RELIED

UPON.

The Court erred in finding and decreeing that
the collision mentioned in the pleadings between
the steamship "Kitsap" and the steamship "In-
dianapolis," resulted from the mutual fault of said
steamship "Kitsap" and said steamship "Indian-
apolis," and in refusing to find and decree that
said collision resulted from the sole fault and neg-
ligence of the said steamship "Indianapolis."

II.

The Court erred in finding and decreeing in
said cause that the damage resulting from the col-
lision mentioned in the pleadings should be di-
vided, and that said libelant should recover only
one-half of the damage sustained b}" it and result-
ing from said collision, and that said libelant should
pay to the said International Steamship Company,
claimant and cross-libelant herein, one-half of the
damages of said steamship "Indianapolis" found
to have resulted from said collision.

III.

The Court erred in finding the amount of dam-
age in the nature of demurrage," to which said
libelant was entitled, at the sum of Fifty Dollars
($50.00) per da}^ during the one hundred thirty-
nine (139) days of detention of the steamship "Kit-
sap" resulting from said collision, and in refusing
to award to said libelant damages in the nature of
demurrage for the said detention at a higher rate
or greater sum than Fifty Dollars ($50.00) per day.

IV.

The Court erred in refusing to allow and
award to said libelant, as a part of the damages
sustained by it as a result of said collision any
amount or sum for depreciation in the value of
the boilers of said steamship "Kitsap" due to a
submersion of said boilers, resulting from said col-
lision.

The Court erred in refusing to allow the Libel-
ant any interest upon the sums expended by it for
the repairs upon said steamship "Kitsap" result-
ing from said collision, and in refusing to allow
any interest prior to the date of said decree upon

the amounts due to said Libelant from said Claim-
ant and Cross-Lil)elant as damages resulting from

said collision.

VI.

The Court erred in refusing to allow, award
and decree to Lilielant the full amount of damages
sustained by it as a result of the collision between
the said steamship "Kitsap" and the said steam-
ship "Indianapolis" together with interest thereon
and its costs upon said suit as prayed for in its

said libel.

VII.

The Court erred in refusing to dismiss the
cross-libel filed by said International Steamship
Company in said cause.

ARGUMENT.

MOVEMEXTS OF THE " IXDIAXAPOLIS. "

We will first consider the course, handling and
action of the "Indianapolis" from the time she
rounded the bell-buoy off Du^Yamish Head, t^YO
miles from her berth and one and three-quarter
miles from the point of collision, until the collision
occurred, and see if there is any doubt as to her
fault.

The "Indianapolis" left Tacoma on this run
at her usual time. It was foggy leaving Tacoma
(R. p. 141), but later it cleared somewhat, and was
more or less clear until after the vessel passed Alki
Point. At some place between Alki Point and the
bell-buoy the "Indianapolis" ran into a fog (R. pp.
152, 173). Up to this time she was making sched-
ule time, running full speed (R. 152). The master,
who had l)een lying down, took charge at the 'oell-
buoy. The fog was so thick that he could not see
the buoy (R. pp. 142, 152, 153, 210). Just ])efore
leaving the liell-buoy the mate, who had l^een in
charge of the vessel, slowed her down because of
the fog (R. p. 153). He ran under a slow bell
possibly half a minute, when the Captain gave or-

dors for full speed ahead, and he proceeded to run
his vessel for five minutes at full speed, or fifteen
knots an hour (R. pp. 143, 155, 160, 295), from the
bell-buoy toward the crowded harl)or of Seattle, in
one of the densest fogs ever known on Elliott Bay,
which, according to his own testimony, got thicker
and thicker as he got nearer the City, where the
smoke was mixed with the fog. He says that he
did not hear any other whistles during this time,
but the evidence of the witness Jacobs, for Ap-
pellee, who was a passenger on the "Indianapolis"
and stood upon her upper deck, was that they heard
whistles all the time (E. p. 213) ; and of the wit-
ness Percival, also for Appellee, was that they
lieard whistles all the way across (E. p. 253).

After running full speed for five minutes into
this fog and covering a distance of one and one-
quarter nautical miles (B. p. 113), Captain Pen-
tield testified that at 4:38 he had the speed of
the ''Indianapolis" reduced to half speed (E. pp.
143, 155), which he says means that her engines
were making 130 revolutions instead of 154, and
that she would run twelve knots an hour instead
of fifteen (E. p. 155). He testified that he then
put her under sh^w l;ell, at which she would make

ninety turns, and that at 4:39 he stopped her en-
gines (R. pp. 143, 158). He said he was positive
that he stopped at 4:39, because he looked at the
clock (E. p. 158). The next order that he says he
gave was for slow astern (R. pp. 144, 158). He
says he gave this slow speed astern bell about a
minute after he stopped his engines, which would
be about one minute after 4:39, or practically at
the time of the collision (R. p. 159). Later he
said that it was a few seconds before the collision
(R. p. 164) . He says that he next gave orders for
half speed astern (R. pp. 146, 163), and that next
he gave orders for full speed astern (R. p. 163).

That these bells to reverse the engines were
given within a few seconds of the collision, we
think clearly appears from the evidence of both
Captain Penfield and Mate Anderson. In fact,
Captain Penfield testified that he saw the "Kit-
sap's" lights before he even gave the half
speed astern order (R. p. 163). The mate says
that he heard Captain Penfield sing out the order
for half speed astern, and that "it was just when
I seen the light" of the "Kitsap," (R. pp. 174,
179), and that the collision was almost immediately
after (R. p. 178). In short, according to this evi-

donee of Captain Penfield, the "Indianapolis" ran
fiive minutes at full speed or fifteen knots an hour,
then at half speed, or twelve knots an hour for a
fraction of a minute, and then at slow speed or 90
revolutions instead of 154, her full speed, for the
])alance of this minute. As witness H. A. Evans
shows this slow speed at 90 revolutions would be
at least 91/2 miles per hour (R. 353). Captain Pen-
field testified that next the engines were stopped
and the vessel drifted with this momentum for a
few seconds, depending on whether the collision
was at 4:391/2 or 4:40; then, although the "Kitsap"
was heard all the time, ten or fifteen seconds before
the collision, a sloir speed astern bell was given,
and after the "Kitsap" was seen 60 to 75 feet away,
a half speed astern hell was given instead of a full
speed astern, which was given later. Although
Captain Penfield testifies that he gave these dif-
ferent bells, it must be remembered that there
is no evidence in the record to sustain his statement
that he ever gave a stop bell or a slow speed astern
]]ell. The log was not produced, nor was the Quar-
termaster, who was at the wheel in the pilot house,
sworn, or his absence accounted for, nor any other
witness produced to corroborate this evidence. If

the bells were given, as Captain Penfield says, cer-
tainly the Quartermaster or some one in the engine
room or on the boat could have so testified.

Engineer Thorn of the "Indianapolis" testi-
fied as to the bells he received and answered, and
we Avish to call particular attention to his testi-
mony. He says they ran full speed to about the
bell-buoy, then slowed to half speed, then pro-
ceeded at full speed again for about four minutes
as nearly as he could recollect (E. p. 295). He says
that he next got a slow bell ; then a half speed astern
bell, then full speed astern (R. pp. 295, 296, 297),
the last just as he felt the impact of the collision
(R. p. 297). He did not receive any stop bell nor
slow astern ])ell, as testified by Captain Penfield.
Proctor for Appellee put the word "stop" into the
witness's mouth on re-direct, but it is evident that
the witness meant the bell given near the buoy,
which he first called a stop bell (R. p. 297), mean-
ing a slow or half speed bell.

This evidence corroborates our contention that
the "Indianapolis" was running full speed or
nearly full speed Tuitil just liefore the collision. It
Avas necessary for her to do so to cover the distance
]:etween the buoy and the point of collision, which

all the evidence shows was a nautical mile and
three-quarters. The chart ottered by Captain Pen-
field shows this distance (Claimant's Exhibit 4);
it is also shown by his evidence that at the time of
the collision he was just about the right place to
haul to his dock (R. p. 169), which point he says
took him seven minutes to reach from the buoy in
fair weather (R. p. 161) ; the evidence of the wit-
nesses for Appellant who stood on the docks, also
those who were on the steamer "Reliance," and of
Lieutenant Stewart and Harbor Master Hill all
show the same thing, and the place where the "Kit-
sap" was found was one and three-quarter knots
from the bu(n\ All of this evidence will be par-
ticularly referred to and pointed out hereafter. To
run one and three-quarter knots in the seven min-
utes between 4:33 and 4:40 required the "Indian-
apolis" to make her full speed all the time, just as
she did in fair weather, because her full speed was
one knot in four minutes or one and three-quarter
knots in seven minutes.

There is also other evidence to sustain this
contention. The witness Weld, for Appellant,
was a passenger on the "Indianapolis" on this trip.
He was sitting in the extreme stern of the "In-

dianapolis" over her wheel. He had had years of
experience on board of steam vessels. He felt the
impact of the collision with the "Kitsap," but
prior to that time did not notice any difference in
the motion or vibration of the "Indianapolis" from
the time she left Tacoma (R. pp. 87-89). Of course,
it will not be disputed that the backing of the en-
gines of the "Indianapolis," whether she was
drifting, at rest, or moving forward, would cause
considerable vibration of the ship, wdiich would be
very noticeable to a person sitting over her wheel.
In fact, the passengers who testified in behalf of
Appellee, base their estimate of the speed of the
"Indianapolis" on the vibration or want of vibra-
tion of the "Indianapolis." Certainly, if the en-
gines of the "Indianapolis" were backed before
the collision, the vibration would have been notice-
able to Mr. Weld, and the fact that he did not
notice this vibration until he felt the impact of
the collision, corroborates the statement of Engi-
neer Thorn, that he received the order for full
speed astern Just at the time he felt the collision;
and also that of Mate Anderson, that he heard the
order for half speed astern, which was given be-

fore the order for full speed, just at the time he
saw the lights of the "Kitsap."

Witness Gilbert, for Appellant, . who was
also a passenger on board the "Indianapolis," was
on the main deck near the engine-room, and he did
not notice any difference in the motion or vibration
of the ship, nor hear any bells given in her engine-
room prior to the collision, the impact of which was
sufficient to knock him out of his chair (R. pp.
114-118).

There is also the testimony of the witness
Foster, for Appellant, who stood on the port
side of the "Kitsap," just aft of the pilot house,
and at the exact spot where the "Indianapolis"
struck the "Kitsap." Foster heard the bells given
on the "Kitsap" to back her; felt her shake while
she was backing (R. p. 91) ; looked at the water
rnd was satisfied that she was standing still at the
time of the collision (R. p. 92) ; and says that the
"Indianapolis" was coming "pretty speedy,"
"showing a big white foam of water on her bow,"
and tlwt she struck the "Kitsap" at the point
where he stood (R. p. 92). In fact, when he first
saw her in the fog, he says she was aimed at where
he stood, and she struck that very spot, where she

was aimed at, and that his parcels which hiy at his
feet, dropped into the hole made in the "Kitsap'*
(E. p. 92) ; which shows conclusively that it w^as
not the "Kitsap" that was moving forward, but
that the "Indianapolis" was the moving object, and
the "Kitsap" was at a standstill, otherwise the
"Indianapolis" would have struck back of that
spot.

The witness Ole Tongerose, for Appellant,
who was one of the look-outs on the "Kitsap,"
stood just forward of where the "Indianapolis"
struck, and says that she was coming very fast (E.
p. 83) ; and the witness Totland, for Appellant,
the look-out on the "Kitsap" who stood in her bow%
says the "Indianapolis" was running fast; that he
heard "her noise in the water, and saw the foam
under her bow" (E. p. 121). Captain Hanson testi-
fied that the "Indianapolis" had very good speed
on (E. p. 33).

Probably the strongest evidence of the speed
of the "Indianapolis" is the cut she made in the
"Kitsap." This is clearly shown in the pictures
offered in evidence (Libelant's Exhibits E, F, G
and II), which correctly show the damage done to
tlie hull of the vessel. This cut is mute but con-

vineing- testimony in snpport of the evidence of
the witnesses we have referred to, that the "In-
dianaj^olis" was the moving object, and that her
speed at the time of the collision was considerable.
As witness H. A. Evans testified, this cnt could
not have been made through the stout iron wood
guard of the "Kitsap" and her heavy planking and
timbers, if the "Indianapolis" had not considerable
headway at the time of the collision (R. pp. 370-
389). As shown by Mr. Evans in his testimony
and as the Court well know^s, if the "Indianapolis"
had l)een standing still or had sternway at this time,
it would have been impossible to cut into the "Kit-
sap" as she did, or in fact, at all.

Appellee, realizing the full importance of this
evidence, seeks to avoid this conclusion, by infer-
ence rather than directly, that the cut. was caused
l)y the "Kitsap" "impaling" herself upon the bow
of the "Indianapolis." This contention seems to
us so absurd that we do not wonder that no witness
was produced in behalf (^f the Appellee who was
willing to express a positive opinion that the "Kit-
sap'' did "impale" herself on the bow of the "In-
dianapolis,'' nor offer any reason to support any
such contention. In fact, we do not think this con-

tention worthy of more than passing notice, and
we think the clear explanation of witness H. A.
Evans, of the effect of the "Kitsap" moving for-
ward, striking the bow of the "Indianapolis"
standing still (R. pp. 378-380), so completely
answers any contention that she impaled herself
on the "Indianapolis" that no further argument
on this point is required.

"When a collision occurs, as here, by the stefn
of a sailing vessel striking the side of a barge
lashed to a steam tug, and with such force as to
split open a new and stanchly-built vessel, and
cause her to sink in a few minutes, it is not diffi-
cult to ascertain which vessel ran into the other.-
To affirm that the sailing vessel was nearly, if not
quite, stationary, and that the i^arge ran into her,
is an appeal to human credulity which ought not to
be attempted in an intelligent court."

Brooks vs. The I). W. Lenox, 4 Fed. Cas.
No. 1952.

In further support of our position that the
"Indianapolis" had been making great speed prior
to the collision, and was making considerable
speed at that very time, is the testim^ony of Mr.
Evans, who took the evidence of Captain Penfield
and plotted the same on a Government chart of
Elliott Bay (Libelant's Exhibit M), and showed
bv mathematical calculation which cannot be, and

has not heen disputed, that the speed of the "In-
dianapolis" was very considerable at the actual
time of the collision, and that it had been very
great just prior thereto (E. pp. 351-356). These
are matters of pure mathematics. We have the
"Indianapolis" at the bell-buoy at 4:33. The dis-
tance to the point of collision was l-)4 nautical
miles; the collision occurred at not later than 4:40;
she had to make this distance of 1% nautical miles
in seven minutes; her maximum full speed was
fifteen knots, and she ran at this speed for five
minutes as testified to by Captain Penfield; it is
therefore merely a question of calculation as to
what average speed she must have made to cover
the balance of the distance, or one-half mile, in
the next two minutes, irhich is (lUo at the rate of
'fifteeu miles per hour.

Proctor for Appellee will undoubtedly attempt
to avoid the effect of this evidence by saying that
Mr. Evans took the course of the "Indianapolis"
as N.E. by E.14E. magnetic, from the bell-buoy,
and that he also took the marks on the course plot-
ted l)y Captain Penfield on Claimant's Exhibit 4,
as the different positions of the "Indianapolis" at
the times stated, and that Captain Penfield, as he

attempted to say when he was last called to the
stand, was mistaken in saying that this course was
a magnetic course, but meant a compass course;
and that the positions indicated on this Exhibit 4
were not intended to be accurate positions from
true measurements.

We think, however, the Court will be satisfied
that the actual course of the "Indianapolis" at
this time was not NE by Ei/oE magnetic. Captain
Penfield testified that he hadtwo courses, one a fair
weather course, the other a foggy weather course,
from the bell-buoy to the dock (R. pp. 142, 145,
418). He testified positively several times that his
foggy weather course was NE by E14E (E. pp.
142, 149, 419), and when Proctor for Appellee
asked him if he meant a magnetic course, he said
"Yes" (R. p. 149). Captain Penfield has been to
sea, according to his own testimony, for thirty
years (R. p. 141) ; he has been Master of ships
for many years; Proctor for Appellee has had
wide experience in shipping cases, and both Proc-
toi' and Captain Penfield well knew the difference
between a magnetic course and a compass course,
and there could be no question but that Proctor
m(/ant and Captain Penfield understood that the

course he was testifying to was a magnetic course.
As he admitted on his cross-examination (R. pp.
420-422), if he had heen testifying to a compass
course, not having given the deviation of his com-
pass, no one, not knowing the deviation, could tell
what that course was, and he intended to give a
course which anyone could luiderstand and draw.

After testifying as to what his course was in
foggy weather, and on this identical trip, he then
offered in evidence a Government chart of the Bay
(Claimant's Exhibit 4), on which he stated he had
drawn this identical course (R. p. 149), but he
marked that course NE by Ei/oE, magnetic, in-
stead of NE by E14E, as he had testified was the
course he steered and was plotting on this chart.
It was very apparent that he wantqd it to appear
from the chart that the course he steered took him
to the Grand Trunk Dock instead of further north
off Piers 4 or 5, as would have appeared if he had
drawn on this chart a magnetic course NE l^y
E14E ; yet it would not have done to draw the half
course and mark it a quarter course, as that dif-
ference would be easily seen.

It is very material whether the course he
steered was a quarter or a half course, as the half

course would make him clear the ordinary course
of the "Kitsap," while the quarter course would
throw the ship considerably north of Pier 4, and
across the course of the "Kitsap." This is clearly
explained by witness H. A. Evans (R. p. 350), and
shown on Libelant's Exhibit M.

When it was found that we had noticed the
discrepancy in Captain Pentield's testimony, he did
the only possible thing he could do to get out of
this hole, and that was to claim that the deviation
of his compass was a quarter of a point eastward,
just the difference between the quarter and the
half course, so that a compass course NE by E14E
would be identical with a magnetic course NE by
£1/2^- He therefore came to the stand and testi-
fied that this was the deviation of the compass of
the "Indianapolis," but was forced to admit that
although he had been Master of the "Indianapolis"
for four years, he had never swung the compass
during that time, nor had it ])een swung (R. p.
415) ; and as any one at all familiar with naviga-
tion knows, it was absolutely impossible for him
to know whether the deviation of his compass was
one-quarter of a point or more or less; in fact, he
said that at one time on this particular course the

:V.)

compass course was the magnetic course, and there-
fore, there was no deviation at all (B p. 423).

But when Captain Penfield gave this testi-
mony, he apparently did not see the conclusion
which necessarily followed therefrom. He testi-
fied positively that his fair weather course was NE
hy Ey2E (B. pp. 142, 419) ; he also testified posi-
tively that he always ran by his compass in fair
weather, and never by land marks (B. p. 147) ;
so that if his fair weather course was NE by Ei/oE,
compass, and the deviation of his compass was one-
quarter of a point easterly, then this was identical
with a magnetic course A^^ hy E%E, and this would
carry him in fair weather a long distance south of
the Colman Dock, where he berthed. When the
questions were put to him which would show these
facts, he saw at once the hole he was in, and he re-
fused to answer until he had to (B. p. 422). All
of this shows that he did not make a mistake when
he testified that his course NE by E14E was a mag-
netic course, and if it was such course, the course
plctted ]^y him on Claimant's Exhibit 4 was not
the course he ran at thi'^ time; but that course, as
the Court can easily see by placing a pair of paral-
1(4 rulers on the chart, would have carried him to

Pier 4, as is shown by witness H. A. Evans on
Claimant's Exhibit M, and if as Captain Pen-
field, when last on the stand admitted, he did not
take the same departure from the bell-buoy in
foggy weather that he took in fair weather, but
that he went from two to three hundred feet out-
side the buoy, farther to the north (R. p. 418), then
this course would have carried him that much
farther north of Pier 4; it would have carried him
to the exact spot \vhere we say he was at the time
of tlie collision, and where all Appellant's evidence
l^laces both vessels at that time. It would place
him where the passengers on the "Reliance" heard
the whistles, crash and voices; where Lieutenant
Stewart heard the whistles; where Captain Hill
heard the crash, and where the witnesses who stood
on the ends of Piers 4 and 6 heard the collision;
where the "Kitsap" would be, leaving Avhen and
as she did, making her usual turn, going her slow
speed at sixty or sixty-tivc revolutions of her en-
gines, and where the "Indianapolis" had no right
to be running at such speed in such a fog, knowing
the "Kitsap" was ahead on her starboard bow, all
of which evidence will be particularly referred to
hereafter.

Further, whether the course of the "Indian-
apolis" as ph)ttecl hy Mr. Evans was her actual
course at this time, or whether it was in fact a
quarter of a point farther south, makes no differ-
ence, the distances on either course from the bell-
buoy were the same; and whether the positions
marked by Captain Penfield on Claimant's Exhibit

4 were in fact the actual positions of the "Indian-
apolis" at the different times stated by him, makes
no difference. Mr. Evans did not base his testimony
solely on these marks, Init he did base it upon the
evidence of Captain Penfield and the distance be-
tween the bell-buoy and the point of collision,
wherever it might be, and then calculated where
she must have been along either course, and at
wliat speed she must have run to reach the point
of collision. If she ran full speed for five minutes,
and her full speed is fifteen knots an hour, then
she ran one and one-fourth nautical miles in five
minutes, and the point of collision, whether off Pier

5 or off the Colman Dock, was approximately one
nnd three-fourths nautical miles from the bell-buoy,
and the "Indianapolis" had to make this nautical
hplf mile in the one and one-half or two minutes
between 4 :38 when Captain Penfield says she slowed

to half speed, or twelve miles an hour, and 4:391/2
or 4 :40, when tlie collision occurred, u'hich required
the same speed.

The Court knows that a vessel running five
minutes at fifteen knots an hour, and then slowing
to revolutions which ordinarily would drive her
twelve miles an hour, would in fact, because of the
momentum the ship already had, drive her more
than twelve miles; and, even if later the engines
were slowed to 90 revolutions, she would still have
considerable headway, and she would carry this
headway for a long distance, even if her engines
were afterwards stopped, which the Engineer's evi-
dence shows they were not, nor were they slowed
to 90 revolutions.

Mr. Evans has given the average speed she must
have made between 4:39 and 4:40, according to
Captain Penfield's chart, as 9.18 knots, or approxi-
mately 10.5 miles an hour (R. p. 353). If this was
the averafje speed, and her speed at 4:39 was twelve
miles, she certainly had a great deal of speed at
the time of the collision, even according to Captain
Penfield 's testimony.

We will not take the time to go into the evidence

of Mr. Evans on these various points, but would
respectfully request the Court to carefully con-
sider the same, too'ether with the various exhibits
introduced in connection with the evidence in be-
half of the Appellant, and we feel satisfied that the
Court will find Mr. Evans' conclusions are correct,
and that our claim is correct that the "Indianapo-
lis" at the very time of the collision, was moving
as fast or faster than the "Kitsap" was moving
at any time, and that her headway up to the very
time of the collision had not been checked, nor had
the reverse bells been given until within a few sec-
onds of the collision. The "Indianapolis" there-
fore, was not under complete control during any
of the time, after running into this heavy bank of
fop; outside tlie bell-buoy, until the collision oc-
curred, as the law requires of vessels coming into
a crowded harbor in a thick fog, where other ves-
sels are coming and going, as they have a right to
do at all times.

If we are correct in this conclusion, and the
"Indianapolis" ran this speed, when, as testified
by Captain Penfield and Mate Anderson, they had
heard the fog whistles of the "Kitsap" at. least two
minutes before, and these fog signals, as they ad-

mitted, had been blowing regularly as required by
the Rules, then there can be no doubt that the find-
ing of fault on the part of the "Indianapolis" is
amply sustained by the evidence,' and it ^Yould be
useless for us to cite authorities to show that such
action on the part of the "Indianapolis" was such
gross carelessness as to render her liable in this
suit. She violated the first part of Article XVI of
the Rules of the Road. She also violated Article
XIX of the Rules, because she had the "Kitsap"
on her starboard bow for some time before the col-
lision, and it was her duty to keep out of the way
of the "Kitsap;" and she also violated Article
XXIII, which required her to slacken her speed
or stop or reverse.

MOVEMENTS OF THE "KITSAP."

Having considered the course, action and
handling of the "Indianapolis" on this occasion,
as shown by the evidence, we will next consider the
evidence concerning the course, action and hand-
ling of the "Kitsap" from the time she left her
berth until the collision took place.

The undisputed evidence shows, and the trial
court found, that the "Kitsap" left the south side
of Pier 4 at 4:35 P. M. There is positive testimony
of witnesses who looked at clocks and watches that
this was the correct time, and there is no claim that
there was any difference between the clocks or
watches from whir-h this time was determined and
the clock of the "Indianapolis," from which the
times referred to in the testimony by Captain Pen-
field are taken; in fact, all parties agree that the
collision occurred lietween 4:39 and 4:40 oV-lock,
according to the time of both boats, so that their
time nuTst have corresponded (R. pp. 37, 160).

The relation of Pier 4, from which the "Kit-
sap left, to the Colman Dock at which the "Indian-
apolis" berthed, is clearly shown in Libelant's Ex-
hibit J. There is no dispute but that the "Kitsap"

regularly sounded her fog whistles from the time
she left the dock until the collision. On leaving the
south side of Pier 4, the undisputed evidence is that
the "Kitsap" backed around the steamer "Re-
liance," then lying at the end of Pier 4, on a star-
board helm to in front of Pier 5 (R. pp. 28, 302,
318, 327, 328; 337). Her Master, Captain Hanson,
a man of years of experience sailing on Puget
Sound, was at the wheel in the pilot house; her
mate stood in front of the i3ilot house on watch, and
two competent seamen were on the forward deck on
the look-out, and she had a full crew (R. pp. 26,
31, 68, 69, 82). The chief engineer was at the en-
gine (R. pp. 101, 102).

It took about one minute under a slow bell to
back from her berth to in front of Pier 5. By ref-
erence to Libelant's Exhiint J, also to Claimant's
Exhibit 9, the Court will see that Pier 5 is the next
dock north of Pier 4, and about one hundred feet
distant, so that the "Kitsap" backed between three
and four hundred feet. The evidence of the Master
of the "Kitsap" was that he backed as he usually
did; that he "didn't give a jingle bell at the dock"
(R. p. 42), and that it took about a minute back-
ing (R. p. 43). The engineer who was in charge

of the engines testified that he ^Yas working the en-
gines on tlie spring line while lying at the dock,
and that he got one bell to stop, and two to hack np,
and that he backed for about one minute (E. p. 60).
Witness Tongerose for Appellant, one of the look-
out men on the "Kitsap," testified that she backed
al^out half speed astern motion (E. p. 85). The
witness Otho Anderson, for Appellant, fireman on
the "Kitsap," who was in the fire-room next to the
engine and in the same room, where he could hear
the bells and see the engine, testified that one bell
was given at the dock to stop, and two to back up,
which the engineer answered; that the "Kitsap"
was an oil burner, having two burners, and that
only one was burning, and it was burning easy (B.
p. 102) ; that if a full speed bell had been given, he
would have had to turn on both Inirners to keep
up steam (E. p. 106). There is no evidence to con-
tradict this testimony, or to show that the "Kitsap"
did not back slowly as stated by these witnesses.

After backing in front of Pier 5, the Captain
":ave one bell to stop and one he]\ to go ahead, and
put his helm hard aport, and the vessel stopped
and w^nt ahead slowly, turning to starboard as in-
dicated on Libelant's Exhibits J and M. The evi-

clence in support of this statement is also imcon-
tradicted and seems conclusive to us. The Master
stated positivel}^ that he gave one bell to stop and
one to go ahead slow, and that she came ahead
slow (R. pp. 29, 41, 43, 52). He testified that the
"Kitsap" was making four or five miles an hour,
while turning (R. p. 30) ; that she was handled so
slow that he told the engineer to "go a little strong-
er" (R. pp. 50, 52), and that then she was going
.qhout five or six miles (R. p. 52). The engineer
testified that he got one bell to stop and one to go
ahead, and that he did stop and go ahead slow (R.
p. 60). He says that he knows she was running
slow by the way the engine was turning over; that
it was making about sixty turns; that after about
half a minute, "the Captain rang the gong and said
'a few turns more, a little stronger;' " that he
"made it a little stronger," "about five more," and
that she continued with sixty-five turns instead of
180 turns when running full speed, until he got a
stop bell (R. p. 61).

Mate Welfare of the "Kitsap" testified that
while the "Kitsap" was backing he stood on her
stern, that lie rould lioar the bells in the engine
room, and that one bell to go ahead was given (R.

p. 68). He says the "Kitsap" was "running about
four or five miles an hour, going very slow" (R.
p. 69), and that a jingle meant full speed.

Look-out Tongerose testified that he looked at
the water and that she was making three or four
or five miles (R. p. Si). Witness Foster, for Appel-
lant, who had had long experience at sea, and who
stood on the main deck of the "Kitsap" next above
the engine, just aft of the pilot house, heard one
bell to go ahead (R. p. 90). Fireman Anderson of
the "Kitsap" testified that they got a bell to go
ahead, and he then came out of the fireroom and
stood looking out of a port opposite the engine (R.
p. 102); that the "Kitsap" was "running very
slow" (R. p. 103); that he could tell this because
he "could see the engine" and "had on one burner
very easy and kept the steam up;" that there had
been no bell to "hook on" from the time they got
{he one l^ell to go ahead until they got a stop bell
before the collision (R. p. 104).

In addition to this evidence of those engaged
in the actual operation of the "Kitsap," there is
the testimony of eye witnesses who saw the "Kit-
sap" back away from the dock and come ahead
making the turn to her course.

The "Reliance," which lav at the end of Pier
4, left just as the "Kitsap" was coming ahead. The
"Reliance" backed and turned to a course for the
bell-buoy, and was just astern of the "Kitsap" un-
til after the "Kitsap" completed her turn (R. pp.
302,. 303, 307, 319, 321, 328, 337). Witness M. B.
Jackson for Appellant, was a passenger on the "Re-
liance," and he watched the "Kitsap" leave and
turn until he saw her stern light as she was run-
ning at right angles to the "Reliance" (R. p. 303).
He heard the danger whistles at the time of the
collision, which he fixes at five or six minutes after
the "Kitsap" left the dock (R. pp. 303, 306).
Witness J. L. Shaw for Appellant, was a passenger
on the "Reliance;" he saw the "Kitsap" leave, and
watched her come ahead, turn and pass out of sight.
He also heard the danger signals and heard Cap-
tain Hanson of the "Kitsap" shout after the colli-
sion (R. p. 319). He savs the "Reliance" was s'oino'
very slowly (R. p. 325). The "Kitsap" must have
also been going slowly, if she had not gone so far
before the collision but that voices could be heard
(m the "Reliance." AYitness McDonald for Appel-
lant, freight clerk on Pier 1, who stood at the end
of that dock, heard the danger whistles, which ap-

peared off the eud of Pier 5 (E. pp. 335, 336). Mr.
Gazzam, President of Appellant Company, was also
a passenger on the "Eeliance." He watched the
"Kitsap" leave and turn and go ahead, and testi-
fied that "both boats were going very slowly" (E.
p. 337), "not to exceed five knots" (E. p. 343).

Witnes H. A. Evans, for Appellant, plotted on
Libelant's Exhibit J, the course of the "Kitsap"
from her Ijerth at the dock to the point of collision,
according to the testimony given by the witnesses
for Appellant, and, taking the undisputed time of
her leaving as 4 :35, and the admitted time of the col-
lision as 4:391/2 or 4:40, computed the average speed
in making thi> distance as 3.9 statute miles per
liour; taking the course of the "Indianapolis" as
starting from the bell-buoy (E. p. 365). If, how-
ever, the "Indianapolis" was two or three hundred
feet north of the l3ell-buoy when she passed it, then
the point of collision was that much farther north,
and the "Kitsap's" average speed would be a little
over this figure. These calculations corroborate the
testim-ony of the witnesses above referred to, and as
this is merely a matter of calculation the court can
easilv satisfv itself that Mr. Evans was correct.

It would seem to us that the foregoing testi-
mony as to the speed of the "Kitsap" should not
only be convincing but conclusive in the case. This
should be especiall^y true as there is no evidence to
the contrary, except persons on the "Indianapolis,"
and the witnesses who stood at the end of the Col-
man Dock and claim to have seen the "Kitsap" go
south past that dock. The evidence of these latter
witnesses we will discuss later, in connection Avith
our argument as to the course of the "Kitsap,"
which Appellee claims took her further south than
the testimony above referred to shows. If the
"Kitsap" had greater speed than was testified to
by Appellant's witnesses, it is strange that Appellee
did not find some of the passengers or crew of the
"Kitsap" who could have testified to that fact.

The only evidence introduced by AiDpellee to
show that the "Kitsap" was going faster than is
claimed by Appellant is the testimony of the follow-
ing witnesses:

Captain Penfield of the "Indianapolis" testi-
fied that the "Kitsap" "was traveling a pretty good
gait" (R. p. 147). He says that he could see her
lights sixty to seventy-five feet away, and her hull
thirty-five to forty feet away (R. p. 168) ; that he

was in the pilot-house of the "Indianapolis" some
thirty feet from her l^ow, and of course, if the
"Indianapolis" was moving forward to the point
of collision, it would be hard for him to determine,
especially in the excitement of the moment, whether
the "Kitsap" was moving fast or at all, or whether
it was the "Indianapolis" which was moving; and
naturally his interest in clearing himself and fixing
the fault on the "Kitsap" would affect his judg-
ment on this question.

The mate of the "Indianapolis" testified that
the "Kitsap" was "going a good clip" (E. p. 175) ;
but as he did not hear any bells on the "Indianapo-
lis," and could not testify as to her speed, he could
not tell whether it was the motion of the "Kitsap"
or of the ' ' Indianapolis, ' ' and he is also an interested
witness. Further, both these witnesses say they
first heard the "Kitsap's" whistle at 4:38 (R. pp.
156, 177), which was only two minutes before the
collision, and both claim the "Kitsap" was then
on the port bow of the "Indianapolis" movmg
south. Even if this was correct, the "Kitsap" could
not have followed any course claimed by Appellee
and reached the point of collision in two minuses
or less, even if she ran at full speed. On the other

hand, if the "Kitsap" took the course claimed by
Apellant, and ran at any speed greater than that
testified to by Appellants' witnesses, she would have
passed the point of collision before 4:40.

The witness Jacobs, for Appellee, testified that
the "Kitsap" was making considerable speed (R.
p. 209). But he also testified that the "Indianapo-
lis" seemed to have some headway. He stood on
the upper deck of the "Indianapolis" back of the
pilot-house, and we think a reading of his testimony
as to the speed of the "Indianapolis," and as to
other things which occurred, will satisfy the court
that he knew very little about the speed of either
vessel, or what occurred. For instance, he Avas very
positive that the "Indianapolis" never ran faster
than half speed, which he said was eight and a half
miles per hour, from west of the bell-buoy to the
point of collision (R. p. 211), and that after run-
ning under this speed for two or three minutes, she
slowed to less than half speed, and never again
went faster (R. p. 212). This testimony is directly
in conflict with tlie ]iositive testimonv of Captain
Penfield that he ran full speed from the bell-buoy
into the fog for five minutes, and the testimony of
the engineer of the "Indianapolis," that he ran the

engine fnll speed for at least fonr minutes during
this period; and is also contrary to the conclusive
fact that it would he physically impossible for a
vessel to cover the distance between the bell-buoy
and the point of collision, which it is agreed was at
least one and three-quarter nautical miles from the
buoy, in seven minutes or less, if she never ran over
eight and one-half statute miles per hour.

The evidence of this witness is also shown lo
have little weight by the fact that he testified that
he heard the "Kitsap's" whistles two or three
points on the port bow of the "Indianapolis," and
then two or three points on the starboard l:>ow (R.
pp. 214, 215). But none of the other witnesses
claim to have heard these whistles more than one
or one and one-half points on either bow. As shown
by the witness H. A. Evans, if the "Kitsap" had
been two and one-half points on the port bow of the
"Indianapolis" at any time, and then later two and
one-half points on the star'ooard bow, the "Indi-
anapolis" at all times maintaining her course with-
in one-sixteenth of a degree, as stated by Captain
Penfield (R. p. 146), the "Kitsap" would have had
to run over twenty miles per hour to have traveled
the distance between these points and reached the

point of collision in the time given hy the wit-
nesses (R. p. 362). This, of course, was impossible,
as the maximum speed of the "Kitsap" was only
fifteen miles per hour.

AYitness Percival, for Appellee, also claimed
that the "Kitsap" was running very fast (R. p.
251) ; but his evidence is so contradictory to the
other evidence in the case that we think it will have
very little weight with the court. He testified that
he was standing in the eyes of the "Indianapolis";
that he did not hear any of the bells given on the
"Indianapolis" to the engine room at any time, and
could only judge of her speed from the feel of the
vessel (R. p. 252). He also testified that he thought
the engines of the "Indianapolis" were dead for
about three minutes before the collision occurred;
that she never went ahead during these three min-
utes (R. p. 254). As shown by witness Evans (R.
pp. 362, 363), this was absolutely impossible, as the
"Indianapolis" could not have reached the point of
collision if her engines had been dead during this
time; and, of course, the evidence of Captain Pen-
field and of the engineer of the "Indianapolis"
shows that they were not dead for three minutes.
This witness admitted that lie thought the "Indi-

anapolis" had some forward motion at the time of
the collision, and that in his opinion the "Kitsap"
was backing at the time the "Indianapolis" struck
her (E. pp. 256, 260). He also stated that the
"Indianapolis" backed just before he could see the
glimmer of the lights on the "Kitsap" (E. p. 257).
It is very apparent that his whole testimony as to
the speed of the "Indianapolis" was based on the
fact that he did not notice her vibration, while he
was standing on her bow looking into the fog, which,
of course, he could not do so long as she was run-
ning ahead, because she would then have very little
viliration, if any, at that point.

In connection with this evidence, we wish to call
the court's attention to the following observations
of the courts concerning this character of evidence:

"I'he established rule is that the testimony of
otHcers and witnesses as to Avhat was actually done
on board their own vessel is entitled to greater
weight than that of witnesses on other boats, who
judge or form opinions merely from observation."

Tlie Alexander FoUom, 52 Fed. 403, 411.

"Courts of admiralty are inclined to accept the
statements of the crew as to the movements of their

own ship rather than those coming from those on
board the other vessel."

The Hope, 4 Fed. 89, 93.

"In cases of collision, where there is great con-
flict of testimony, the court must be governed chiefly
by undeniable and leading facts, if such exist in the

The Great RepuMc, 23 Wall 20.

"Superior credit must be given in regard to a
vessel's own movements, to the testimony of those
on board of her, where it is probable and consistent
and not overborne by any decided weight of other
testimony. ' '

Carll vs. The Erastus Wiman, 20 Fed. 245,

248.

"In attempting to gather the actual facts of a
collision from the contradictory testimony of wit-
nesses, it should be borne in mind: (1) That the
testimony of the crew of each vessel, with regard
to her course and the various orders given to and
executed by the wheelsman and engineer, should be
credited in preference to the testimony of an equa]
number of witnesses upon another vessel relating to
her movements, as they appeared to them."

The Alherta, 23 Fed. 807, 810.

Speaking of the testimony of witnesses on a
\'essel with reference to the speed of another vessel

colliding with the first vessel, the court used this
language :

''The libelant's witnesses tliink she did not
move back soon en(uigh, and had not conquered her
headway when the collision occurred, nor made
more than one or two revolutions backward, wdiile
her own people say she had not only stopped her
headway, but ^^'as actually moving back when the
collision occurrec". Her own officers were in the
best position to know this fact, and, other things
being equal, th.^ir testimony is to prevail over that
of observers fr(,ui the shore or on the Lane and her
barges. ' '

The ChcrolY'f, 15 Fed. 119, 121.

"We are not impressed with the value of the
passenger's testimony (as to the speed of the ves
pel), although he was an intelligent and candid wit-
ness. He was standing at the Delaware's port
bow% leaning upon the rail at the point where it was
carried away bv the collision, and his attention was
attracted ])v the signals and the bells to reverse.
* * "^ Manifestly, the witness was speaking from
impressions rather than from any tangible, evi-
dential facts. The time for observation consisted
of the few seconds, fraught with apprehension and
ex'^'itement. that intervened between the time he
saw the St. Louis, 50 or 75 feet away, and the time
the vessels came together. * * * t};^^ opinion of
a nautical man under similar circumstances would
be of little probative w^eisdit. and that of a non-
expert ought not to be entitled to as much."

The Sf. Louis, 98 Fed. 750.

"The estimates as to speed given by passengers
who are not experts are generally unsatisfactory."

La Bourgogne, 139 Fed. 433, 443.

Evidence of the respective speed of the vessels
in a collision may be deduced from the cut resulting
therefrom.

Tlic John I. Brady, 115 Fed. 204.

"The wound itself is the one fact which out-
weighs all the other evidence. It cannot be argued
or explained away."

The Alhcrta, .wpra.

The evidence of experts who have examined the
injury after a collision was held competent by this
court as to the speed of the vessels, in the case of
The Belgian King, 125 Fed. 869, 876.

"Mere expletive or declamatory words or
phrases as descriptive of speed or acts unaccom-
panied by any evidence capable of conveying to the
ordinary mind some definite conception of a specific
physical fact, and depending generally upon the
degree of nervous emotion, exuberance of diction,
and volatility of imagination of the witness, and not
uj^cm his capacity to reproduce by language a true
picture of a past event, are of slight, if, indeed,
they are of any, assistance in determining the real

character of the fact respecting which they are
used. ' '

Foley vs. Bosto^i d' M. R. R. Co. (Mass.),
79 N. E. 765.

The only other evidence offered by Appellee
witli reference to the speed of the "Kitsap," and
also with reference to her course after leaving Pier
4, was the testimony of four witnesses who claimed
to have stood on the end of the Colman Dock, and
to have seen the "Kitsap" pass that dock. We will
discuss this testimony in detail in connection with
our ararument as to the course taken ])v the "Kit-
sap," as all of these witnesses testified that the
vessel they took to ho the "Kitsap" was going in a
different direction from the point of collision when
they saw her.

The trial court found that at the moment of tlie
collision both vessels were moving ahead with con-
siderable momentum, and rejected as untrue all the
evidence to the contrary, and stated that "the con-
clusion is unavoidable that the collision was caused
by navigating both vessels at a high rate of speed in
a dense fog, and both are equally at fault" (E. p.
433). To reach this conclusion as to the "Kitsap,"
the court had to disregard the positive testimony of

the officers of the "Kitsap" as to the bells given
and answered, the fact that she was using only one
fire, the number of turns her engines were making,
and the testimony of all Appellant's witnesses as to
the actual speed the vessel was making. It also
disregarded the calculations of witness Evans as to
the speed the "Kitsap" must have made in order
to cover the distance on the course Appellant's wit-
nesses testified the "Kitsap" took, as well as on
the course Appell«t^ claims she took, which calcula-
tions are easy to verify and have never been dis-
puted. The court must also have disregarded the
evidence of speed deducible from the cut made in
the "Kitsap," as explained by Avitness Evans (E.
pp. 370-376), and his opinion based thereon. And
the court must have based its finding, as to the
"Kitsap."^ solely upon the evidence of the two
officers of the "Indianapolis" and her two passen-
gers, who were the only witnesses for Appellee who
testified directly as to the "Kitsap's" speed at the
time of the collision ; although the court disregarded
the evidence of these same witnesses as to the speed
of the "Indianapolis" herself. The court also dis-
regarded the undisputed evidence that if the "Kit-
sap" took either r(»urse, and ran on that course at

"a high rate of speed," she ^vould necessarily have
lieen far past the point of collision in the undis-
puted time of five minutes between leaving her dock
and the collision.

The only possible way the court could make
this finding as to the "Kitsap" was to accept as
true the testimony of the four witnesses who stood
on the end of the Colman Dock, to the effect that
the "Kitsap" passed south beyond that dock, and
therefore ran a longer course than claimed by Ap-
pellant, which would require a greater speed than
testified to by Appellant's witnesses; but if her
speed was ten ov twelve miles, as they testified, she
would have passed the point of collision. But at
the same time, the court found that the "Ktisap,"
after ])acking, "went ahead curving to starboard,
until she came around on her regular course headed
for Four Mile rock, on the north shore of the har-
lior" (E. p. 432). The uncontradicted evidence
shows that the "regular course" of the "Kitsap"
was not scuth of the Grand Trunk Dock, nor as far
south as the point between the Grand Trunk Dock
and the Colman Dock, where the court found the
point of collision to be. These findings are abso-
lutely inconsistive and are, we think, not only un-

sui3ported by the evidence, but both findings cannot
possibly be correct.

We did not think proctor for Appellee will at-
tempt to argue that the evidence supports any find-
ing that the "Kitsap" was running at any greater
speed at any time than as testified to by Appel-
lant's witnesses, if the "Kitsap", did run on her
"regular course," as found by the trial court. But
he will claim that the "Kitsap" did not run her
regular course, but went far south of that course,
as shown by Claimant's Exhibit 9, and that this
course being longer than the "regular course,"
required her to run faster, and of course, in that
event, the court's finding that she "came around on
her regular course" could not be correct. We will,
therefore, discuss the evidence as to the course of
the "Kitsap" on this trip, and the point of col
lision.

The regular course of the "Kitsap," as testified
to by Appellant's witnesses, and not contradicted, is
shoAvn on Libelant's Exhibit J, which also shows the
course of the "Indianapolis" N.E. by E.14E. from
the ])e]l-l)uoy, as testified to by Captain Penfield;
vml it nlso shows the coursx' of the steamer "Reli-
ance" on leaving the dock. The regular course of

the "Kitsap," also the course of the "Indianapolis"
N.E. by E.1/4E. from the bell-buoy, is shown on
Lil^elant's Exhibit M* and in red^ on this exhibit
is sho^Yn the course the Appellee claims the "Kit-
sap" took on the trip in question. On Claimant's
Exhibit 4 is drawn the fair irentlier course of the
"Indianapolis" from the bell-buoy N.E. by E.iAE.,
which shows that this course comes south of the
Grand Tnnik Dock, and by comparison with Libel-
ant's Exhibit M and Claimant's Exhibit 9, shows
that such course does not cross the regular course of
the "Kitsap." Claimant's Exhibit 4 also shows
what Appellee claims was the course of the "Kit-
sap" at the time in question. This is also clearly
sh(.^Yn l)y Claimant on its Exhibit 9, where it is
marked the "oi'dinary" course of the "Kitsap,"
also the course it claims the "Kitsap" took at the
time in question, and the course of the "Indianapo-
lis." It njust ]ie remembered that the course of the
"Indianapolis," as shown on this Exhibit 9, is her
fair weather course, N.E. by E.i/oE., and not the
course N.E. by E.14E., which Captain Penfield
testified he ran this trip, and which would take him
to a point off the north side of Pier 4.

The trial court found the point of collision to

be where the line marked. "Course of Kitsap, Dec.
14," crosses the line marked "Course of S. S. Indi-
apapolis" on Claimant's Exhibit 9. But the court
also found that the "Kitsap" turned on her "regu-
lar course," and the court will see that this regular
course does not even touch the line marked "Course
of S. S. Indianapolis," nor come within one hun-
dred feet of the point of collision, as found by the
trial court. It cannot be claimed that the "Indi-
anapolis" was in fact on the northerly course, and
that the collision occurred where the line marked
"Course of Kitsap, Dec. 14," would cross that
course, because such a point would not be between
the Grand Trunk Dock and the Colman Dock.

The trial court must have entirely disregarded
the testimony of Captain Penfield as to his depart-
ure from the l^ell-buoy at this time that his course
was N.E. by E.14E. from the bell-buoy, and all the
evidence of Appellant's witnesses as to the course
of the "Kitsap," and where they heard the col-
lision; and the court must have intended to find the
point of collision as indicated on Claimant's Ex-
hibit 9, although such a finding is inconsistent with
his finding that the "Kitsap" turned on her regular
course. We think the evidence fullv sustains our

r-ontentioii that the "Kitsap" did turn on her regu-
lar course at this time, not on the course marked
"Course of Kitsap, Dec. 14," on Claimant's Ex-
hi]nt 9; and if we are correct in this, it is a matter
of absolute certainty, demonstrable by mathematical
calculation, that the collision took place north of
where the court found it to be, and that the "Kit-
sap" could not have been running at a high rate of
speed, or any speed in excess of that testified to by
Appellant's witnesses, because such a speed would
have placed her far past such a point at 4:391/2 or
4:40.

The only witnesses on behalf of Appellee who
testified as to the course of the "Kitsap" at this
time, or at any other time, were the four witnesses
who claimed to have stood on the end of the Colman
Dock.

The first of these witnesses was Frank
Burns, general manager of Appellee Company. He
testified that he saw the "Kitsap" pass the Colman
Dock, headed south right across the end of the
dock, at right angles, and about one hundred feet
away, running ten or twelve miles per hour (R. pp.
181, 182, 186). He testified that, in his opinion, it
was 4:42 or 4:43 that he saw the "Kitsap;" that

it AYas two or three minutes after the "Indianapo-
lis" was due in at that dock, and that she was due
at 4:40 (R. p. 186). He said that he saw the "Kit-
sap" about one hundred to one hundred and twenty-
five feet away (R. p. 186) ; that he did not see her
name (R. p. 192) ; that she was in sight for about
a minute; that she did not appear to be turning
(R. p. 186), but that she appeared to be running
at this speed down the face of the dock to the south,
and that about three minutes later he heard the
danger signals off the end of the Cohnan Dock
(R. p. 187). While the witness was ready to state
positively that it was the "Kitsap" which he saw,
without seeing her name, and, although he admitted
that it was foggy, so that he could see only a dim
light on the Grand Trunk Dock some of the time
(R. p. 186), we do not think this evidence will have
any weight with the court. In the first place, he
fixes the time positively as after the time the col-
lision had actually occurred; and in the next place,
he fixes the collision some d.r mi mites after all the
other witnesses agree that it occurred; again he
says that the vessel which he saw was running at
right angles along the front of the dock, and it did
not appear to be turning. If it was the "Kitsap"

it was necessary that she make a turn after she had
passed out of sight of this witness, and would place
the collision long after it actually occurred. It
must, therefore, he true that if the witness saw any
vessel passing the dock at all, it was not the "Kit-
sap" but some other vessel.

We would call the court's attention especially
to the evidence of witness Evans concerning this
testimony of Mr. Burns (R. p. 357).

Witness Brydesen, who testified that he was
standing on the end of the Colman Dock with
Mr. Burns at this time, also claimed to have seen
the "Kitsap" go by. He fixes the time as 4:40 or
4:45, l)y the Oolman Dock time, which was AYestern
Union time, and the same time as that used by the
"Indianapolis (R. p. 202). He was positive that it
was at least 4:40; that it was after the time the
"Indianapolis" was due, and that she was due at
4:40; he did not see the name of the vessel that
passed (R. p. 203) ; he says he saw the ship some
one hundred or one hundred and fifty feet out from
the end of the dock (R. p. 197) ; but says that the
fog was heavy one minute and the next minute
could see one hundred feet or farther (R. p. 196).
He must therefore have seen this vessel at the ex-

treme range of vision in the fog. He says that she
was broadside to the end of the dock, headed at
right angles to the dock, but 'was rounding slow
(R. j)P- 200, 201) ; that she was going ten miles or
better (R. pp. 197, 201). H^ sa^^s he saw" the out-
line of the boat (R. p. 203), and also admitted that
it w^as extremely "thick weather" (R. p. 205). He
testified that he was dispatcher of boats at the Col-
man Dock, that he knew their courses and also the
ordinary course of the "Kitsap," and the "Kit-
sap's" ordinary course went "up to the Grand
Trunk Dock," "she is just off the Grand Trunk
Dock wdien she makes the turn" (R. pp. 201, 202).
He did not hear the danger wdiistles, although he
stood beside Mr. Burns who claims to have heard
them, only a short distance away (R. p. 199). What
we have said with reference to the testimon}^ of
the witness Burns applies to the testimony of this
witness. It is impossible that the vessel he saw, if
any, could have been the "Kitsap," as, according
to all the evidence, she was not in this vicinity at
this time, but was sinking after her collision some-
where north of the Colman Dock. We also call the
court's attention to the testimonv of the witness

Evans relative to this testimony of the witness
Brydesen (R. pp. 357, 358).

Witness Tuclver, a former employee of Appellee,
was the third witness standing on the end of the
Colman Dock. He testified that he saw the "Kit-
sap" go by. He did not remember the exact time,
hut said that the "Indianapolis" was due (R. pp.
222, 227, 228). He admitted that the fog Avas thick
for an instant, but claimed that a wave would come
which would thin it, so you could see two hundred
feet (R. p. 221). The vessel he saw was traveling
at a right angle to the end of the dock, but he says
she was swinging a little (R. pp. 222, 225). He
also gives her speed at approximately twelve miles
an hour, and says that he saw her from one hun-
dred and twenty-five to one hundred and fifty feet
off the end of the dock. He did not see the name
of the vessel, but could see her windows and a "dim
outline" of the boat (R. p. 226). He heard the
danger whistles not over five minutes after he heard
the "Kitsap" leave the dock (R. p. 225). As we
have shown, of course, this boat could not have been
the "Kitsap."

The other of these four witnesses was the wit-
ness Gleason, another employee of the Appellee

Company, who also says that he was standing at the
end of the dock at this time, and saw the "Kitsap"
one hundred feet or more away; that she was trav-
eling fast, about ten or twelve miles an hour (R.
pp. 230, 231). He says the ship was going south,
but swinging to starboard out into the bay (R. p.
230). He also fixes the time at from 4:40 to 4:45
(R. p. 231). He claims to have seen the ship for a
minute (R. p. 231) ; that he last saw her one hun-
dred feet south of the Colman Dock (R. p. 252).
He did not see her name, nor see any lights on her,
although the evidence is that the lights of the
^'Kitsap" were all burning (R. pp. 36, 307). There
would seem to us to be no doubt that if this witness
saw any vessel passing the dock, it was not the
"Kitsap."

We think the evidence of witness H. A. Evans,
with reference to the testimony of these witnesses,
shows conclusively that they were mistaken when
they testified that they saw the "Kitsap." Nor
can it be claimed that they were mistaken as to the
time when they claim to have seen this vessel pass-
ing the Colman Dock, because they all fix it so
definit-i;/. ITov.TYcr. tbe testimony of the witnesses
produced ]\v appellant in its rebuttal, who saw the

"Kitsap" leave aud make the turn from in front
of Pier 5, and who stated positively that she never
went south of the Grand Trunk Dock and, there-
fore, could not have heen in front of the Colman
Dock, nor within sight of witnesses standing at the
end of the Colman Dock, as well as the testimony
of the officers of the "Kitsap" as to her course at
this time, will satisfy the court that these witnesses
for Appellee were mistaken as to the vessel they
saw, or that they did not see any such vessel, and
that the "Kitsap" never did pass the dock. Cer-
tainly their evidence alone should not he sufficient
to overcome the testimony of Appellant's witnesses
on this question.

Lieutenant Stewart of the United States Navy,
stationed at Bremerton, from 4:30 o'clock on this
day stood on the extreme stern of the steamship
"Kennedy," then lying on the outer face of the
Colman Dock, with her stern much farther out
than the balcony where these four witnesses stood.
The leaving time of the "Kennedy" was 4:40. He
was in a position to see any vessel passing that dock
much better than the four witnesses above referred
to. He states positively that he did not see any
vessel pass by the dock before he heard the distress

signals from the "Kitsap" and "Indianapolis" at
a point north of where he stood (R. pp. 298-300).

It is not disputed that the "Reliance" lay at
the end of Pier 4 at the time the "Kitsap" backed
out from the south side of this pier, and that the
"Reliance" left the dock, turning to her course for
the bell-buoy just about as the "Kitsap" came
ahead after backing in front of Pier 5. The evi-
dence of Captain Wallace, then the first mate of the
"Reliance," and the testimony of several passen-
gers on board of her, is jDOsitive that the "Kitsap"
never went south of the "Reliance," but at all
times was on her starboard side; that the "Reli-
ance" made her usual turn to her course to the bell-
buoy, which ordinarily would not have, and in this
ease did not carry her south of the Grand Trunk
Dock. Captain Wallace saw the "Kitsap" leave,
back around the "Reliance" and go ahead, swinging
to starboard out into the bay (R. p. 328). The
"Reliance" left just as the "Kitsap" was steaming
ahead. She gave a kick back and turned to star-
board, the "Kitsap" always remaining on her star-
board side (R. pp. 328, 330). The "Kitsap" kept
turning to starboard until she was headed northerly
toward Four Mile Rock (R. p. 329). The regular

course of the "Eeliance" never took her south of
the Grand Trunk Dock, and she did not go south
of that dock at this time, and the "Kitsap" was
north of her all the time (E. pp. 329, 330). He
heard the danger whistles of the two vessels north
of the "Eeliance" (E. pp. 330, 332).

Witness Jackson, a passenger on the "Eeli-
ance," testified that the "Eeliance" made a course
following the "Kitsap," taking her usual course;
that the "Kitsap" never went south of the "Eeli-
ance," but kept turning to starboard until she went
out of sight, showing her stern light (E. pp. 301-
303, 307). He did not notice any difference in the
course of the "Eeliance" at this time from her ordi-
nary course, with which he was familiar, as he had
i}een riding on the "Eeliance" daily for some time.

Mr. Gazzam was a passenger on the "Eeli-
ance." He testified that he stood forward of the
pilot-house and saw the "Kitsap" leave and swing;
that she never went south of the "Eeliance," and
that the "Eeliance" made her usual turn, never
o-oinff south of the Grand Trunk Dock. He also
heard the whistles of the "Kitsap" to the north of
the "Eeliance" (E. pp. 337, 342).

Witness Sliaw was a passenger on tlie "Reli-
ance" and saw the "Kitsap" leave and turn out of
sight, remaining always to the north of the "Reli-
ance" (R. pp. 319, 321). He says he could see tiie
fireboat lying at the City Dock between the Grand
Trunk Dock and Pier 3, which was the next pier
south of Pier 4, and testified that the "Reliance"
did not go south of the Grand Trunk Dock (R. pp.
320, 322, 326).

Harbormaster Hill testified that he was in his
office in the to^ver on the outer corner of the Grand
Trunk Dock toward Pier 4, and saw the "Kitsap"
make the turn, and that she did not go south of the
Grand Ti'unk Dock; he heard the crash of the col-
lision two and one-half points off the Grand Trunk
Dock to the northwest (R. pp. 405, 407, 410).

Witness Kurin, wharfinger on Pier 4, testified
that he stood at the end of Pier 4 and heard the
danger whistles of both l^oats to his right while he
was facing the bay, as he showed on Libelant's Ex-
hibit K (R. pp. 309-11).

Witness McDonald also stood on the end of
Pier 4, and heard the danger whistles to his right
(R. pp. 335, 336).

/ i

Witness F. L. Evans, wharfinger on Pier 6,
was on the end of that dock, which was the second
pier north of Pier 4. He testified that he heard
tlie crash of the collision, the breaking of glass and
the voices, which appeared to him six hnndred to
eight hnndred feet sonth or west of where he stood,
as he indicated on Libelant's Exhibit L (R. pp.
312-313).

Besides these witnesses, there is the testimony
of the officers and crew of the "Kitsap" as to her
ordinary course, and her course on this trip. Cap-
tain Hanson testified that he put the helm hard
aport when the "Kitsap" came ahead after backing
in front of Pier 5, just as he usually did; that com-
ing ahead at slow speed under this helm the "Kit-
sap" would go to the north corner of the Grand
Trunk Dock, and that she never went south of the
Grand Trunk Dock (R. pp. 29, 30) ; that at this
time the "Kitsap" came around on her usual course
W. by S.14S. for Four Mile Rock (R. pp. 30-31) ;
that the tide was running northerly in the direction
of his course for Four Mile R(^ck about one mile an
hour (R. pp. 35-36), and that the "Kitsap" was
north of Pier 4 at the time of the collision (R. p.
36).

Mate Welfare testified that in making her
usual course the "Kitsap" never went south of the
Grand Trunk Dock, and that when the "Kitsap"
went ahead her helm was hard aport (R. jDp. 66, 67,

68, 77).

Lookout Tongerose testified that the "Kitsap"
went ahead "swinging all the time" (E. p. 79), and
that she usually went "just about to the Grand
Trunk Dock," never south of it (R. p. 80).

It would seem to us that this testimony should
be sufficient to satisfy the court that the "Kitsap,"
on the trip in question, never went far enough south
to turn and pass the point the trial court found the
collision occurred. It certainly should be sufficient
to overcome the vague, contradictory and impro;>
able statements of the four witnesses for Appellee,
who stood on the end of the Colman Dock, and who
might be easily mistaken, especially in view of their
interest in this suit.

There is no evidence that either the "Kitsap"
or the "Reliance," on leaving Pier 4 and turning
on their respective courses, ordinarily ever went
^^outli of the Grand Trunk Dock. Certainly if thev
had ever gone south of that dock in making this
turn. Appellee would have been able to secure some

evidence of this fact. On the other hand, Appellee
introduced a drawing (Claimant's Exhibit 9), show-
ing the ordinary course of the "Kitsap" as testified
to by Appellant's witnesses. No reason has been or
can be given or suggested why either the "Kitsap"
or the "Reliance," on leaving this pier at this time
to turn to their ordinary courses, should have gone
farther south than they usually did, or than they
would naturally be carried in making this turn. In
fact, there is every reason to suppose that they
woTild not go as far south at this time as they would
ordinarily in clear weather, for the reason that they
would naturally at this time go more slowly than in
clear weather, and the more slowly they went, espe-
cially with the tide running northward, the shorter
would be their turi]. and the less likely that they
woidd go south of their ordinary courses.

Neither of these vessels could have gone south
(»f the Grand Trunin Dock, and especially not south
of the Colman Dock, as testified to by Appellee's
four witnesses, if their helms had been hard aport,
as testified U\ In fact, the "Kitsap" wonld have
had to run s(nne eight or nine hundred feet nearly
straight, after coming ahead, before turning, and
have passed across the course of the "Reliance" and

close across the end of the Grand Trunk Dock, if the
testimony of these four witnesses is correct that
they saw her from one hundred to one hundred and
fifty feet off the Oohuan Dock. This clearly ap-
pears from the drawing introduced by Appellee as
Claim^ant's Exhibit 9. But tlie "Kitsap" did not
go there. The testimony of Lieutenant Stewart and
all the evidence of disinterested witnesses, as well
as all the circumstances in the case, fully corrob-
orate the testimony of the officers of the "Kitsap"
and the "Reliance" in this respect.

We feel that the court will be satisfied beyond
a doubt that the "Kitsap," at this time, left Pier 4
and turned to her course in the ordinary way, never
going south of the Grand Trunk Dock, and never
crossing the course which the evidence shows the
"Indianapolis" usually took to reach the Colman
Dock, and the course which she should have taken
at this time. We also think the court will be fully
satisfied from the evidence, that the "Kitsap" never
went faster than four or five miles an hour. If she
took her ordinary rourse and left at the time it is
undisputed that she did leave, and the collision oc-
curred at 4:10, as all agree, it is a matter of mathe-
matical calculation as to what speed she made dur-

ino- this time ]3et^yeen these points. The only theory
upon wliich Appellee could elaun the "Kitsap"
made greater speed than is claimed by Appellant's
^Yitnesses, is to claim that she Avent farther south,
and that her course between the point of departure
at Pier 5 and the point of collision was a longer
course, and that they had to travel faster in order
to cover this distance in this time. But Appellee's
evidence to establish this fact, as we have shown, is
so inconsistent, so vague and improbable, even to
the extent of impossibility, that we certainly do not
think the court will feel that this evidence out-
weighs the positive testimony of Appellant's wit-
nesses as to the course the "Kitsap" actually took
at this time. Even if their testimony as to her
course is correct, and that she was running ten or
twelve miles on the course shown on Claimant's Ex-
hil:)it 9, she would have passed either course of the
"Indianapolis" before 4:40, as the court can easily
prove.

If we are correct as to the course taken hv the
"Kitsap," then her speed is established by the
mathematical calculations and the positive testi-
mony of the officers and crew and passengers on the
"Kitsap," to have been very slow, not to exceed at

any time five miles per hour. This speed cannot be
claimed to be excessive on the part of the "Kitsap."
Her maximmn STDeed was fourteen or fifteen miles,
an hour; a speed of four or five miles per hour
would give her little more than good steerage way,
and would certainly leave her under complete con-
trol at all times. This was all that was required of
her.

If we are correct as to the speed and course of
the "Kitsap," then there was no fault on her part
unless it occurred after she heard the "Indianapo-
lis' " fog signals. We will therefore consider the
evidence on this question.

When the "Kitsap" left the dock at this time,
her master was in the pilot-house in charge of the
wheel (R. p. 31). Her mate was first on her stern
until she had ceased to back and came forward
turning on her course, when he came forward of the
pilot-house and stood there as an additional look-
out while leaving the harbor. There were two look-
outs on the bow, one on her extreme bow, a man of
experience, and the other, also experienced, stood
on the main passenger deck, just forward of the
l)ilot-li(mse (R. pp. 68-69). A\\ passengers were
back of the pilot-house (R. p. 82), and the windoAvs

were open (E. p. 44). There was nothing to ob-
struct the vision or hearing of any of these officers.
The "Kitsap" was sounding her fog signals regu-
larly; her engineer was in the engine room in
charge of the engines; she was proceeding slowly,
and all her lights were burning (R. p. 36). No
whistles from the "Indianapolis" were heard until
the "Kitsap" had turned to her course toward Four
Mile Rock. The captain, mate, both lookout men
and witness Foster all testified positively to this
(R. pp. 30, 31, 48, 49, 70, 80, 87, 93, 121). No
whistle from the "Indianapolis" was ever heard on
the starboard bow of the "Kitsap," nor while she
was turning (R. pp. 31, 49, 80, 93, 131). In fact,
the "Indianapolis" was too far from the "Kit-
sap" while the "Kitsap" was turning to hear
her whistles; and as the "Indianapolis" did not
hear the "Kitsap" until 4:38 (R. pp. 155, 177), the
"Kitsap" could not have heard her whistles before
that time. The "Kitsap" went ahead at 4:36; the
"Indianapolis" was then one and one-quarter stat-
ute miles away; two minutes later, when the "Kit-
sap" had nearly completed her turn so that the
"Indianapolis" was on her port side, the "Indi-
anapolis" was still one-quarter of a statute mile

from the dock, and although the "Kitsap" had in
the meantime gone awa}^ from the dock, there was
certainly no time intervening while the "Indianapo-
lis" was on the port side of the "Kitsap," that the
"Indianapolis" was near enough to be heard, even if
she happened to blow her whistles at just the right
time to be heard before the "Kitsap" had turned.
After the "Kitsap" had turned, and the "Indi-
anapolis" had come near enough to be heard, her
whistle was heard three or four points off the port
]x)w. Both captain and mate knew that it was the
"Indianapolis" (R. pp. 31, 70, 77). They knew
they were on their own course (R. pp. 31, 47, 51, 69,
77), and that the course of the " Indinapalis, " if
she was on her regular course, as they had a
right to assume at that time, would not cross their
course, and there was no danger of a collision (R.
pp. 39, 46, 53, 54, 55, 57). They were just leaving
the docks of a large city in a heavy fog, where
vessels were coming and going at all times; they
had no reason to stop when they heard the first
whistle of the "Indianapolis," and, in fact, it
would have i^een extremely dangerous, both to them-
selves and other vessels, for them to do so and lose
control of their vessel, unless the daup-er was so

imminent as to absolutely require it; but there was
no apparent danger at this time. With the tide
running, the "Indianapolis" coming in on a course
Avhich ordinarily would take her astern of the
"Kitsap," the "Reliance" leaving on a course
astern of the "Kitsap," the "Telegraph" coming
in, and other vessels coming and going, or liable to
come and go at any moment, it certainly would
have been gross negligence under the circumstances,
as shown liy this evidence, for the "Kitsap" to have
stopped when she heard the first whistle from thr^
"Indianapolis." In no sense can it be claimed that
Rule XVI of the Rules of the Road required her to
stop at this time. The vessel they heard was known
to them; her position was ascertained; she was a
ve-sel having a daily regular run to and from the
harl)()r; her regular course would amply clear
them, and they had a right to assume that she was
on that course until it later developed that she was
not. Neither would the circumstances permit the
"Kitsap" to stop in front of the docks under these
conditions, until the danger of a collision with the
"Indianapolis" was imminent.

Further, the "Kitsap" had the right of way
under Rule XIX, as she was on the starboard bow

of the ''Indianapolis," and by Bule XXI the "Kit-
sap" was required to keep her course and speed.
She was sounding frequent fog signals which were
heard on the "Indianapolis," and she had a right to
assume at this time that the "Indianapolis" would
obey the rules and keep out of her way. Further,
she was proceeding very slowly, and was under
complete control sufficient to enable her to be
stopped before she could collide with any other ves-
sel after seeing her, if the other vessel did not run
into her. Under these circumstances, the "Kitsap"
proceeded slowly, but eased off a little to starboard
away from the "Indianapolis" (R. p. 77). A few
seconds later they hearf' another whistle and then
a third, and the captain of the "Kitsap" then im-
mediately gave a bell to stop the engine (R. pp. 32,
49, 61, 62, 70, 87, 91, 96, 103) ; then almost imme-
diately after he gave two bells and a jingle, the
signal for full speed astern, all of which l)ells were
im.mediately answered.

The "Kitsap/' under these bells, came to a
stop. This is sh(»wn l)y the evidence of Captain
Hanson (R. pp. 33, 36, 37); by the evidence of
Engineer Hanson, who says he answered the bells
by opening tlie engine wide open (R. p. 62) ; hy the

ovideiico of the mate, who says she would stop
under these circumstances in fifteen or twenty sec-
onds (R. pp. 71, 72) ; by the evidence of lookout
Tongerose, who says she "was making astern" when
struck (R. p. 81) ; by the evidence of Foster, who
felt her shaking under the backing bells (R. p. 91),
and says she was "dead still" (R. p. 92), which he
knows because he looked at the water and could tell
(R. p. 95) ; by the evidence of the fireman, who
stood at a port near the engine, heard the bells, saw
them answered, felt the shaking, and saw the white
foam from her Avheel (R. p. 103).

Besides this evidence is the testimony of the
witness Evans, an expert of exceptional qualifica-
tions, that from a careful examination of the cut
of the "Kitsap," in his opinion she had "practically
no movement in the water along the line of her
keel at the instant of collision" (R. pp. 370-379).
We ^^'ould respectfully call the attention of the
court particularlv to this evidence of Mr. Evans,
which, because of his ability as an expert, the care
with which he examined the question, preparing
drawings and illustrations to make his evidence
clear, and his entire want of any bias or interest in

the case, we believe entitles this evidence to great
weight.

In the face of all this evidence, and in view of
the authorities we have heretofore cited, as well as
the well-known rules of law and common sense to
be used in weighing testimony, we fail to see how
the court can take the evidence of four witnesses
on the "Indianapolis" as to the "Kitsap's" speed
or motion at the time of the collision, to support a
finding that she was then "moving ahead with con-
siderable momentum," or at all. Especially should
this be true when one of these very witnesses for
Appellee admitted that in his opinion the "Kitsap"
was backing at the time of the collision (R. pp. 256,
260). In fact, we believe the evidence, if carefully
considered and weighed, will leave little doubt in
the court's mind that the "Kitsap", was handled at
all times with the greatest care and caution; that
she complied strictly with the rules of navigation;
that she kept her slow speed and course as she was
bound to do, and was at all times under such con-
trol that she could be stopped ])efore she would
collide with the "Indianapolis," after seeing her,
if the "Indianapolis" did not run into her, and that

if the "Indianapolis" had been under the same con-
trol no collision \YOuld have occurred.

It may he argued that because the "Indianapo-
lis' " whistles were heard in the same general direc-
tion from the "Kitsap," they indicated danger. Of
course, this argument could not apply to the first
whistle, nor to the second; and after hearing the
third whistle, she stopped, then backed at full speed
and came to a standstill. Certainly nothing more
could lie done or was required. But we do not think
three whistles from the same general direction in
themselves indicate danger, especially when coming
from a knoAvn vessel, having a known course clear
of the course of the vessel hearing them ; nor should
such an argument have much weight under the evi-
dence in this case as to the gross fault of the "Indi-
anapolis" and the careful handling of the "Kit-
sap''; nor should it be sufficient to warrant a find-
ing of mutual fault and a decree dividing the dam-
ages.

Appellee will probably claim that the "Kitsap"
crossed the course of the "Indianapolis" twice, and
was therefore negligent. The testimony of the
various witneses in behalf of the Appellee that they
heard the whistles of the "Kitsap" first on the port

bow, and then on the starboard bow, we think is
entitled to very little weight. In the first place, as
stated by numerous witnesses for both parties,
there were a great many whistles sounding at this
time in the harbor, and no one could be positive
that the whistles he heard on the port bow of the
''Indianapolis" were those of the "Kitsap"; and
the fact that one A^itness (Jacobs) said that he
heard these whistles two to two and one-half points
off the port bow, while other witnesses say they
heard the whistles not more than one point oif the
port bow, shows that they had reference to different
whistles. It is admitted that the "Telegraph" came
in from West Point at this time, and her whistles
were on the port side of the "Indianapolis."

Further, as already shown, the "Indianapolis"
did not hear the "Kitsap's" whistles until 4:38, two
minutes before the collision (R. pp. 155, 177). If
these whistles were on the port side of the "Indi-
anapolis" at all, the "Kitsap" was then north of
the Grand Trunk Dock at least, and she could not
possibly pass to the starboard of the "Indianapo-
lis" and turn and reach any point on any course of
the "Indinapolis" in the two minutes before the
collision. The ( ourt need onlv to measure on Claim-

ant's Exliilnt 9 the distance necessary to travel in
these two minntes from a point to port of the
"Indianapolis'' to her starboard and to a point on
her conrse, and see the speed required to make that
distance in two minutes, to see that this statement
is true.

jjowever, the conclusive answer is that if the
"Indianapolis" was on the course N.E. by E.14E.,
magnetic, as testified to by Captain Penfield, and
the "Kitsap" backed in front of Pier 5, as all the
evidence shows she did, she never could have been
more than two degrees on the port bow of the "Indi-
anapolis," which is only a trifle over one-sixth of
one point; and she was at this point at 4:36, when
the "Indianapolis" was only three minutes from the
bell-buoy, and one and one-quarter miles from the
"Kitsap," so far away that it was impossible to
hear the whistles from the "Kitsap" on the "Indi-
anapolis (R. pp. 356, 357).

If proctor would claim that the true course of
the "Indianapolis" at this time was not NE. by
E.i4E., magnetic, Init this was the compass course,
and the course was in fact N.E. by E.i/^E., magnetic,
still the "Kitsap" at Pier 5 could have been only a
fraction of a point on the port bow of the "Indi-

anapolis," and then at a time when the "Indianapo-
lis" was abont a mile and a quarter away, too far
to hear her whistles. Again, if this latter course is
the correct course, then the ''Kitsap" could not
have been even one point on the starboard bow of
the "Indianapolis." Even if the testimony of the
witnesses who tood on the end of the Colman Dock
were true, and the "Kitsap" went as far south as
they claim she did, she never was one point on the
starboard bow of the "Indianapolis," no matter
which course the "Indianapolis" was on. The
court will readily see this is correct by drawing this
course on the chart, and locating one point (111/4
degrees) north or south of it.

We would respectfully call the attention of the
court to the testimony of witness H. A. Evans on
this subject, ^vhich can be easily verified (R. pp.
355-357, 362).

Proctor will undoubtedly argue that the place
where the "Kitsap'' was found disproves our con-
tention as to the loration of the collision and the
course of the two vessels. However, there is a
simple but complete answer to this.

It is true that "Kitsap" was found near the

fair u'caflicr course of the "Indianapolis," on a line
between the Colman and Grand Trunk Docks, and
a short distance off the end of those docks. But
this conclusively proves that she was yiot struck at
this point, as she did not sink below the surface of
the water untitl some twent}^ minutes after the col-
lision. When struck, the "Kitsap" was headed to-
ward Four Mile Rock in a westerly or northwesterly
direction, and the "Indianapolis" was headed to-
ward the docks. The "Indianapolis" backed away
and then came back to the "Kitsap" holding against
her b(^w, part (^f the time with lines on the "Kit-
sap," the engines of the "Indianapolis" moving
ahead slow, and her helm hard aport (R. pp. 164,
165). When the "Indianapolis" let go the "Kit-
sap," and she sank, both vessels had turned Inilf
round the "Indianapolis" heading away from the
docks (R. pp. 169, 170-172), and the "Kitsap" head-
ing; in an esaterlv directi(m (R. pp. 171, 172), and
when found by the salvors her bow was pointing
toward the East Waterway (R. p. 316).

The answer to such a contention on the part of
the Appellee is therefore very plain. The "Indi-
anapolis" going ahead with helm hard aport turned
herself and the "Kitsap" in a circle southward un-

til the "Kitsap" sank where she was afterwards
found. Cajotain Penfield, in answer to proctor's
questions, claimed that the "Indianapolis" Avould
hardly move herself or the "Kitsap" by doing this,
and sought to leave the impression that the two
vessels swung around as on a pivot. This, of course,
could not be true. The "Indianapolis" could not
turn herself alone in the water on a pivot, and the
"Kitsap," a much lighter vessel, would not offer
sufficient resistance laid alongside, to act as a pivot
in the water, even with the tide running against
them one mile an hour. The court has seen tugs
turn barges and vessels and knows that they make
a considerable circle, its size depending, of course,
on various conditions, such as tide, wind, size of
barge or vessel, size of the tug and the speed of her
engines, but this resistance of a vessel against a
small tug turning her would not be sufficient to
make them turn on a pivot, Init they wonld describe
a considerable circle.

Captain Penfield claimed the "Indianapolis"
would turn as if she was working tied at a dock
(R. 1). 172), l>ut the court knows that in such case
she would not turn at all, Imt merely hold steady,
while ill tliis case she actually turned around; in

fact, slie could not go ahead with sufficient speed to
tnrn herself and the "Kitsap" without moving in a
circle to starboard, her helm being hard aport. It
follows, therefore, that Mr. Evans was correct in
his opinion that the vessels did describe a partial
circle southward at the end of which the "Kitsap"
was let go, and sank at the place where she was
afterwards found (R. pp. 381, 382, 397, 398).

Mr. Evans could not give the exact length of the
arc of this circle, not knowing exactly the various
conditions affecting it, but he gave his opinion that
this arc Avas as shown on Appellant's Exhibit J.
We believe this is substantially correct, as shown
l^v all the evidence. But in any event, the "Kitsap"
must have been stnick considerably uorfh of the
place she was found, and, therefore, north of the
proper course of the "Indianapolis," and north of
the |)lace the trial court found the point of collision
to he. She was net struck south of the point where
she was found, because no one claims that the
"Indianapolis" was ever south of that line. She
coidd ]iot have been struck at the point where she
was found, because if the effect of the "Indianapo-
lis" going ahead pushing against the "Kitsap" was
merelv to turn her round, the tide in the twenty

minutes between the collision and the sinking of the
"Kitsap," running at the rate of one mile an hour,
would have carried both vessels one-third of a mile
north ; therefore, she could not have been struck at
this point.

Proctor will undoubtedly refer to the testimony
of Captain Hanson and Engineer Hanson to the
effect that the speed of the "Kitsap" was increased
while she was turning. Captain Hanson testified
that he told the engineer to go "a little stronger"
because she handled slow (R. p. 50) ; and Engineer
Hanson says he gave the engine five more turns,
that is, sixty-five instead of sixty, her full speed
being one hundred and eighty turns (R. p. 61).
This was before the "Indianapolis" was heard, and
certainly it was not then improper to run sixty-five
turns instead of sixty, which was only a little over
one-third her full turns. But we wish to call the
court's attention to this testimony, to show the fair-
ness of these witnesses as compared with the testi-
mony of Captain Penfield. It appears that Engi-
neer Hanson did not remember receiving this order
at the time he testified before the government in-
spectors, but ()]i talking later with the captain he
rerollcf-tcrl it, and freelv testified to the fact before

the commissioner in this case (R. p. 65). If there
had heen the slightest disposition on the part of
these officers to coh)r their evidence or hide anything
or be nntruthful, the engineer wonld have con-
vinced the captain that the order was not given,
and they wonld have so testified, instead of the
other way.

Proctor will probably argne that the "Kitsap"
only acquired the right of way under Article XIX
of the Eules of the Road by deliberately turning
a half circle in front of the known course of the
"Indianapolis." As we have shown, and as ap-
pears from the great preponderance of the evi-
dence, the course of the "Kitsap" never at any time
crossed or touched the known course of the "Indi-
anapolis." That course in fair weather was to a
point aliout one-quarter of a mile off shore, and
south of the south line of the Grand Trunk Dock,
and at that point she turned south to go along the
angling face of the Colman Dock. The regular
course of the "Kitsap" never touched this course,
and would not even touch the line of this course
projected to shore (Claimant's Exhibit 9). Ac-
cording to all of Appellant's evidence, the course of
the "Kitsap" on this occasion did not cross or touch

this course or a projection thereof. However, as
the "Indianapolis" was in fact on a course several
hundred feet northerly of her regular course, the
"Kitsap," when she was at Pier 5 at 4:36, was
about in line with that course projected to shore.
But the "Indianapolis" was then only three-quar-
ters of a mile from the bell-buoy, and a mile and a
quarter from the "Kitsap," too far for either
vessel to hear the other. The "Indianapolis" did
not hear the "Kitsap" at 4:36 nor until 4:38, after
the "Kitsap" must have been on the starboard bow
of the "Indianapolis," and the "Kitsap" did not
hear the "Indianapolis" until she was in fact on the
starboard bow of the "Indianapolis," and then
heard her on her own port side. Whether or not
the "Indianapolis" knew it was the "Kitsap"
which she heard is immaterial, she did bo* know that
a vessel was coming out of the harbor on her star-
l^oard bow, and it was her dutv, especially in
heavy fog, and as she was off her regular course,
to keep out of the way of that vessel. It was cer-
tainly no fault of the "Kitsap" to make the turn
she did under these circumstances, and after making
the turn and hearing the "Indianapolis' " whistles,
she was bound, under the rules, to keep her course

and speed until danger ^Yas imminent, and had a
right to assume the "Indianapolis" would obey the
rules and pass astern.

We wish briefly to call the court's attention to
the witnesses for the respective parties in this case.
Of course, the principal witness for Appellee is
Captain Penfield, master of the "Indianapolis."
We do not think much need be said about his evi-
dence, as it so clearly appears that he tried in every
way in his testimony to shield himself; repeatedly
contradicting himself on different points, and con-
tradicting other evidence offered in behalf of Appel-
lee ; and also tried to show some fault on the part
of the "Kitsap," so that the liability of the "Indi-
anapolis" for damages might be divided. Mate
Anderson was also an interested witness, but he
knew very little about the facts of the case. It does
not appear that there was any look-out on the "Indi-
anapolis," although the cross-libel alleges that fact,
anad no other officer or member of the crew of the
" Indianapolis, ^' except the engineer in charge,
testified in the case. It is certainly remarkable that
the quartermaster at the wheel, who knew what sig-
nals were given by the captain at his side, and what
course was steered, was not called to testify; and

100

certainly if there had been a look-out on the "Indi-
anapolis," who would have been in a better position
to see the action of the "Kitsap" than anyone else
on the "Indianapolis," he would have been called as
a witness in this case, or his absence explained.

Witnesses Frank Burns, Charles Brydesen, J.
E. Gleason and J. R. Tucker, all employees or ex-
employees of the Appellant Company, clearly show
their bias, and their testimony is so improbable,
and against all of the other evidence in the case,
that it certainly can have very little weight.

Witness B. F. Jacobs, a Tacoma lawyer, even
though he was commodore of the Tacoma Yacht
Club, sho^ved remarkable ignorance concerning the
speed of the "Indianapolis"; and we think that
neither his testimony nor the testimony of the wit-
ness Percival will have very much weight with the
court, because so clearly against facts in the case
testified to by other witnesses on behalf of Appellee.
Engineer Thorn merely gave the bells which hp
received and answered, and his evidence on this
])(.iut corroborates our claim as to the speed of the
"Indianapolis."

As to the evidenre of witness Frank Walker,
we think the way he tried to avoid answering clear

101

question;^ put to him on cross-examination, and liis
evident bias in the case, and his willingness to give
his professional opinion that the "Kitsap'' "mi-
paled" herself on the bow of the "Indianapolis,"
without giving the slightest reason for such opinion,
all show that his evidence is entitled to little weight.
He admits that he had been doing all the surveying
of vessels for the Appellee Company, and we think it
appears very clearly from his manner of testifying
that he was laboring hard to try to bolster up what
he knew was a weak case, in order to help show
some fault on the part of the "Kitsap," which
might result in a division" of damages. We would
call the court's attention especially to the evidence
of witness H. A. Evans relative to the claim that the
"Kitsap" "impaled" herself on the bow of the
"Indianapolis" (R. pp. 378-380), although, as stated
in the case heretofore quoted from, such a proposi-
tion (night not to be advanced before an intelligent
court.

The witnesses we have referred to above are the
only witnesses who testified in behalf of the Appellee
as to any matters concerning the course, speed,
handling or fault of the "Kitsap."

Opposed to these witnesses we have the evi-

102

dence of Captain Hanson, who testified frankly,
and who is corroborated in ahiiost every particular
by the evidence of the mate, the two look-out men,
the engineer and the fireman of the "Kitsap." We
also have the engineer, who was fair enough to ad-
mit that he was mistaken in his testimony before
the Inspectors, and that he did receive an order to
go a little faster, and whose evidence as to how the
engines were run is fully corroborated by the fire-
man who was in the engine room with him. We
have the testimony of the two look-out men, which
is clear, frank, and corroborated by the other evi-
dence; and we have the evidence of the fireman,
who corroborates the engineer and other witnesses.
Certainly the evidence of these witnesses, instead of
being wholly disregarded, as it was by the trial
court, is entitled to great weight, not only under
the well-settled rules of law heretofore referred to,
but also because this evidence is reasonable, con-
sistent, and rorroborated by other unimpeached tes-
timony, as well as by circumstances and admitted
facts. We cannot understand why the trial court
should have disregarded this evidence and based a
finding solely upon evidence of witnesses which,
imder the well-recognized rules of law, is entitled

103

to little weight, even if it was consistent and prob-
able, but wliieli is in fact inconsistent, vague and
improbable, some of it, as we have shown, absolutely
impossible, especially when at the same time the
Court disregarded the testimony of those same wit-
nesses as to the speed of their own vessel.

Besides these members of the crew, we have
the testimony of witnesses absolutely without any
interest in the case, and all, so far as their evidence
covers the same points, corroborating each other.
We have the testimony of witness Foster, a pas-
senger on the "Kitsap;" also of Mr. Jackson, a
business man of Seattle; also of Mr. Gilbert, a pas-
senger on the "Indianapolis" who had no interest
whatever in the case ; also the evidence of Mr. Weld,
a man of considerable experience on steam vessels,
who was also a passenger on the "Indianapolis,"
and had no possible interest in the outcome of the
case; we have the evidence of Lieutenant Stewart,
who stood on the stern of the "Kennedy," and who
knew in what direction the sounds of the collision
were, and who could not be accused of having the
slightest interest or bias in the case. Captain Hill,
H^rbermaster of Seattle, also testified for Appel-
lant, and we lielieve his evidence will have great

104

weight with the court, as he certainly had no in-
terest. The witnesses who stood at the end of Piers
4 and 6, and heard the collision, had no interest in
the case, and their testimony was clear, and we be-
lieve convincing. The evidence of Captain Wallace,
then first mate of the "Reliance," was fair and cor-
roborated by a great deal of the other evidence in
the case. Captain Wood of the West Seattle Ferry,
corroborated the evidence of Appellant's witnesses
as to the density of the fog, and directly contra-
dicted Captain Penfield and Appellee's witnesses
that the fog was raising and lowering or in waves.
Mr. Shaw, a rancher and a passenger on the "Re-
liance," had no interest in the case, and his testi-
mony is very positive as to the course of the "Kit-
sap" and the "Reliance," and where he heard the
collision and Captain Hanson's voice.

Of course, it will be argued that the testimony
of Mr. Gazzam is biased because of his interest in
the suit. 1)11 1 we believe the court will see upon read-
ing his evidence, that he would not testify to a
single thing which he did not absolutely know of
his own knowledge, never coloring his evidence in
the slightest way to lielp himself, and that he would
frankly admit any facts, no matter whether they
would help or injure him in this case.

As to the evidence of Lieutenant Commander
Evans of the Navy, we feel that it is entitled to ex-
ceptional weight in this case. Of course, proctor
will claim that he was interested and biased in favor
of Appellant. We think a reading of his evidence
will show that he had absolutely no bias in the case,
and that his sole purpose was to testify to facts as
he knew or believed them to be, in answer to the
questions which were propounded to him, and with-
out regard to whether they would help or hurt the
Appellant in the case. It is tme that Mr. Evans
had spent a great deal of time in considering this
case, that he had heard or read all of the evidence
in the case, and that he had made a very careful
study of this evidence with a view of being a wit-
ness in the case, all of which, of course, was neces-
sary to enable him to testify intelligently, and give
his evidence any weight. But we wish to say this,
that a man of Mr. Evans' standing in his profession
in the Navy of this country is such, that we believe
The court will l^e satisfied that he would not prosti-
tute his professional standing, nor his self-respect
l)y testifying to a single thing or expressing a single
opinion that he did not actually know, or after care-
ful consideration conscientiously believe was right.

. 106

That no amount of interest, in the outcome of a
case, would cause him to color his evidence or ex-
press anything but an honest opinion, after the most
careful consideration and study, and without regard
to the effect it might have upon any issue in thcf
case. He certainly was one of the best qualified
witnesses to testify on the lines in which he was in-
terrogated that could possibly have been secured,
and his evidence is so clear, and his reasons so sound
and so fairly and clearly given that we believe his
evidence and opinions will have the greatest weight
with the court. We do not believe that anything
proctor may say or infer with reference to Mr.
Evans' connection with the case will in the slightest
degree shake the confidence of the court in the
soundness of his opinions, or the correctness of his
testimony.

Neither proctor for Appellee nor any witness
he produced was able to answer or criticize the tes-
timony given hy Mr. Evans. All proctor can do is
to criticize Mr. Evans for testifying in the case
while he was a Government officer, and to claim
that Mr. Evans was biased, because he took Captain
Penfield's testimony as to his course and shoAved
where the "Indianapolis" must have been under

107

that evidence, and the speed she must have run.
We do not think the fact that Mr. Evans held a
Government position in any way disqualified him
from testifying in the case, nor was it improper for
him to do so. Mr. Evans was not unfair nor biased
in anything he testified to with reference to Captain
Penfield's testimony. He did not seek to take any
advantage of any mistake on Captain Penfield's
part in giving his evidence; and in fact, Captain
Penfield did not make a mistake until he tried to
correct his evidence, after he saw its effect, by
claiming the deviation of his compass was just
enough to make the course what he wanted it to le
at this particular time ; but the same deviation would
throw him far south of his berth at other times, so
that his first testimony is shown to have been cor-
rect, and corroborates the testimony in behalf of
the Appellant as to where the "Indianapolis"
actually collided with the "Kitsap."

Certainly, with the burden on the "Indian-
apolis" to show that she was not negligent in run-
uhifj into the "Kitsap," when she had had her on
her starboard for sufficient time to have stopped or
kept out of the way, we do not think that the evi-
dence offered by the Appellee will satisfy the court

108

that Appellee sustained that burden; and we think
the court will he satisfied that there was no neo-li-
gence on the part of the ''Kitsap."

Proctor for Appellee brought out on cross-
examination of the master and mate of the ''Kit-
sap," that the "Kitsap" had left Pier 4 at about
4 o'clock on the afternoon of the day in question^
on her regular run, and had run into and sunk a
launch, and a life was lost, shortly after leaving
the dock, after which she returned to the dock, and
it was on her leaving the second time that she was
run into by the "Indianapolis." The avowed pur-
pose of this was to try to show that Captain Hanson
was excited or nervous on leaving this second time,
and that he did not know what he was doing; but
of course, the real purpose was to raise a prejudice
against the "Kitsap" on account of this former ac-
cident. However, the evidence disproves any claim
that Captain Hanson was nervous or excited, or that
he did not know what he was doing because of the first
accident. He testified that the launch ran across
his bow in the fog, and he hit her (P. pp. 41, 42),
and of course, there is no evidence in this case to
the contrary, nor any evidence of negligence on the
part of the "Kitsap" in the first collision. It goes

100

^Yitllout saying that the Court will not consider the
first accident as having any bearing on the questions
at issue here, and there is no presumption that it
was due to any fault on the part of the "Kitsap."
Captain Hanson testified that he was not ner-
vous on account of the first accident (E. p. 42),
and Mr. Gazzam, President of Appellant Company,
who saw Captain Hanson on his return to the dock
after the first collision, testified that he was not ner-
vous or excited, and that if he had been in an unfit
condition to take the "Kitsap" out, he would not
have permitted him to do so (R. p. 336). In fact,
the first collision made the officers and crew of the
"Kitsap" more cautious on going out the second
time. Two look-out men were placed on the bow,
all passengers were ordered off the forward deck,
and the mate took a place just forward of the pilot-
house, so that every possible precaution was taken
to avoid another accident.

We wish to call the attention of the court to
a few propositions of law and authorities which we
think will be helpful in passing on the questions
heretofore argued. We do not think there is the
slightest doubt that the court will find the "Indian-
apolis'' was grossly at fault, nor do we thing proc-

110

tor for Appellee will very seriously contend the con-
trary. This being true, and it being conceded that
the "Indianapolis" had the ''Kitsap" on her star-
board bow long enough before the collision to haye
stopped or cleared her, and that the "Indianapolis"
ran into the "Kitsap," while under the rules the
"Kitsap" was required to keep her course and;
speed, unless circumstances required her to yiolate
that rule, the burden was on the "Indianapolis" to
show by a preponderance of the eyidence that the
"Kitsap" was at fault in not yiolating that rule,
or in doing or not doing some act.

"The fault of the Mack being established be-
yond cayil she is not entitled to diyide damages
with the Rome upon criticism of her management
except upon clear proof of some fault not made in
extremis, and reasonable doubts should be resolyed
in her fayor. The Atlantic, 119 Fed. 568, 56 C C
A. 134; The Ne?r York, 147 U. S. 72."

Lake Erie Transp. Co. vs. Gilchrist T. Co.,
142 Fed. (C. C. A. 6th) 89.

"When the fault, primarily, is on the part of
the yessel required to keep out of the way, the other
haying the right of way will not be held in fault
except on a preponderance of proof that she did
not take reasonable measures to ayoid collision as
snon as she had reason to apprehend danger."

Spencer on Marine Collisions, Sec. 66 and
cases.

Ill

In connection with the consideration of the
question as -to the fault of the "Indianapolis," we
call the Court's attention to the following authori-
ties:

"The rule adopted by some maritime courts is,
that a steamship should always he under such con-
trol that it can be stopped, and its direction of speed
reversed, within the distance at which an approach-
ing vessel can be seen."

Spencer on Marine CoUisious, Sec. 44, citing
The Sacde, 63 Fed. 478 ;

McCcibe vs. Old Dominion S. S. Co., 31 Fed.
234;

The Bolivia, 49 Fed. 169.

"Keeping a powerful steamer at full speed
through an obscured atmosphere is negligence per
se. The law imposes upon very vessel the duty of
slackening her speed according to the density of the
fog and the difficultv of clear vision, even to the
lowest point consistent with maintaining steerage-
way."

Spencer on Marine Collisions, Sec. 44; citing
Clare vs. P. d^ S. S. Co., 20 Fed. 535.
Cunard S. S. Co. vs. Fahre, 53 Fed. 288.
The Pennsjjlrania, 4 Ben. 257.

"The criterion of moderate speed in all cases
is the ability of the ship to stop immediately in the
presence of danger."

112

Do.

The Lelancl, 19 Fed. 771.

The Alliance, 39 Fed. 476.

The City of New York^ 147 U. S. 72.

''A greater degree of vigilance is required of a
ship navigating the waters of a harbor in foggv or
thick weather, where the passage of vessels is of
frequent occurrence than on the high seas, where
the liabilitv of meeting others is less. A vessel has
no right to run in a dense fog near piers, docks and
anchorage grounds, where vessels usually tie up or
are moored, except at the slowest rate of speed pos-
sible, consistent with steerage-way, and with a due
observance of every other precaution that can be
invoked to guard against collision."

Do. Sec. 49, citing

The St. John, 29 Fed. 221.
The Howard, 30 Fed. 280.
The Demorest, 25 Fed. 921.

"The starboard hand rule operates on both ves-
sels. The one is to get out of the way bv a change
of course, or stopping or reversing, the 'other is to
keep her course and speed."

The Elimheth, 197 Fed. 160, 162.

We would also call the court's attention to its
decision in the case of The Belgian King, 125 Fed.

The only evidence introduced by Appellee, as

113

directly tondiug to show the speed of the "Kitsap"
at the time of the collision, ^Yas the evidence of the
master and mate of the "Indianapolis," and of the
witnesses Jacobs and Percival. The rules already
referred to as to the weight to be given evidence of
persons on one boat concerning the speed of an ap-
proaching boat, apply to all of these witnesses; and
the well-known rnles applying to the testimony of
interested witnesses, apply to the testimony of the
two officers of the "Indianapolis." It clearly ap-
pears that the witnesses Jacobs and Percival were
mistaken about the speed at which the "Indian,
apolis" was run from the bell-buoy to the point of
collision, and being mistaken in this material fact,
of course, doubt is thrown upon their testimony as
to the speed of the "Kitsap."

"When witnesses directly contradict each other
upon a main point in issue, greater weight should be
^iven, other things being equal, to the testimony ot
those whose statements on other material points
have not been proved incorrect, than to the testimony
of those who have made mistakes. Where a witness
testifies to an event consisting of several incidents,
for instance, an outside observer testifying concern-
ino- a collision l^etween two vessels, and it appears
that he is mistaken in some particulars, even though
of no great moment in themselves, it indicates that
he was not so clear and accurate an observer as to
iustifv giving his version of the occurrence higher
credit" than that of an<^ther witness of equal oppor-

114

tunity for observation who is not convicted of
errors."

Moore on Facts, Sec. 1088.

In connection with the testimony of witness
H. A. Evans, for Appellant, and Frank Walker, for
Appellee, as to their opinion of the speed of the two
vessels drawn from an examination of the cnt in
the ''Kitsap," we call the court's attention to the
language in a British Columbia case decided by Sir
Matthew B. Begbie, L. J. A., as follows :

"It can be mathematicallv proved that the
theory of the Cutch as to the conditions of the
actual collision is entirely baseless. It would be
mathematically impossible that the Joan, throwing
herself at the rate of ten knots per hour across the
bow of the Cutch, a nearly stationary ship, as the
defendants' witnesses would appear to* suggest, could
cause the injuries described and not disputed, viz.,
a deep cleft nearly perpendicular to her beam. If
the injuries were occasioned as the defendants con-
tend, the rent would extend in a direction from the
stem of the Joan toward her stern, and would be
mainly external, without much penetration. But if
two vessels of nearly equal size and speed, of equal
momentum, collide at an angle of about 45°, the in-
jury will extend inwards into the vessel that receives
the shock, in a direction nearly perpendicular to
her beam. This will be apparent on drawing the
necessary diagram so as to show the resultant thrust ;
the impetus of the recipient vessel being exactlv
represented by an equivalent thrust in the'directioii
oi)posite to her motion. That is to sav, the injury

115

inflicted, and shown to have been suffered l)y the
Joan, is exactly explained by the plaintiffs' account
of the position and speed of the vessels, though
their witnesses did not seem to understand that ; and
is quite irreconcilable with the circumstances sug-
gested by the defendants."

The Cuteh, b British ColumMa, 357, 361; 3
Can. Exch. 362, 368.

Appellant claims that, contrary to her usual
course and custom, on the trip in question, the "Kit-
sap" ran at a high rate of speed down the face of
the docks, far out of her course, in this dense fog,
without showing any reason why she should have
done so. To do this, of course, would be manifestly
running a great risk of losing the vessel and pos-
sil)ly the lives of those aboard. It is a well settled
principle of law that the presumption is that per-
sons will not run unnecessary hazards or risks, and
we think the following observations of Moore on
Facts, and the cases cited l^y him, are pertinent to
a consideration of this claim of Appellee.

"There is always a presumption of more or less
weight that those in charge of a vessel will not sub-
ject their lives to hazard by neglecting to maintain a
vigilant watch, especially in a state of the weather,
such as wind, rain and darkness, which makes navi-
gation difficult. * ^ *

116

In a collision case between vessels the sugges-
tion that the smaller and weaker steamer sought the
collision was not entertained, since it w^as incon-
sistent with the strongest motives which usually gov-
ern human actions. * * *

The presumption that men will not carelessly ex-
pose themselves to peril aids circumstantial evidence
of the degree of daylight at the time of a collision
between vessels."

Moore on Facts, Sec. 559.

"The danger and injury to both vessels is so
great in almost every case, one or both not unseldom
going down with all on board, that the strongest
motives exist with all to use care and skill to avoid
collisions. The want of them, therefore, is never to
be presumed, but is required to be clearly proved.
To presume otherwise would be to presume men will
endanger their own lives and property, as well as
those of others, without anv motive of gain or ill
will."

Warhnj vs. Clarke, 5 Howard (U. S.), 441,
501. '

In this case, the presumption as to the "Indian-
apolis" has been fully overcome by the admissions
of Captain Penfield and Engineer Thorn that the
vessel did run for five minutes, through the fog,
toward tlie docks, at her full speed; and l)y tlie fur-

117

tlicr fact that during the succeeding two minutes
before the collision she must have continued at prac-
tically this speed in order to have reached the point
of collision. But the presumption prevails in favor
of the "Kitsap," as against the testimony of the
four witnesses for Appellee who claim to have stood
on the end of the Colman Dock, and to have seen
the "Kitsap" racing full speed past that dock, out
of her course, in the dense fog, without any known
purpose or motive and against the positive testimony
of a large numher of witnesses.

It will be noticed that neither the master's log
nor the engine room log of the "Indianapolis" was
produced at the hearing in this case. Of course, the
logs of the "Kitsap" could not be produced, as she
was sunk within a few minutes after being struck.
It will also be remembered that neither the quar-
termaster, who, Captain Penfield testified, was at the
wheel of the "Indianapolis," nor any look-out on the
-Indianapolis," if there was one, as alleged in the
cross-libel, were offered as witnesses in the case, nor
was their absence explained. It appeared (R. p.
294) that the engine room log was, at the time Engi-
neer Thorn testified, with the United States Inspec-
tors, l)ut no reason was given why it was not ob^

118

tained and offered in evidence, nor anj reason given
why the captain's log was not offered. It is a well-
known rule of law that the non-production of ma-
terial evidence raises a presumption that it would be
unfavorable if produced.

"Where the evidence tends to fix a liability on
a part}" who has it in his power to offer evidence of
all the facts as they existed and to rebut the infer-
ences which the proof tends to establish, and he
neglects or refuses to offer such proof, the natural
inference is that the proof, if produced, instead of
rebutting, would suipport the inference against him.

Where the burden of proving a defense in a
collision case was cast upon the respondent, the
neglect of the latter to produce some of its seamen
who had deserted, but who by reasonable diligence,
the court thought, could have been found, was 'open
to remark.' "

Moore on Facts, Sec. 564.

"Where the credibility of a witness is put in
doubt, but his testimony is susceptible of corrobora-
tion, the court will probably take notice if no effort
is made to substantiate his statement. * * * ^
party can hardly hope to overcome a strong pre-
sumption by force of his own testimony alone if he
fails to produce available witnesses to corroborate
him. * * *

119

Failure of a ship against which the evidence is
strong in a collision case, to produce all of her offi-
cers and crew as witnesses, necessarily puts her
claim at a disadvantage."

Moore on Facts, Sec. 566.

120

DAMAGES.

The damages sustained by the "Kitsap" are
easy to be determined under the sa*4 rules of law
applicable thereto, as Appellee did not introduce any
testimony to contradict the evidence of Appellant as
to these items.

"It is the general rule in collision cases that the
measure of damages is the actual loss suffered."

The Columbia, 109 Fed. 660 (C. C. A. 9th
Circuit) ; also

Societe, etc., vs. O. R. d- N. Co., 178 Fed. 324.

"The measure of damages in case of a partial
loss is the amount necessarily incurred in repairing
the vessel and in restoring it to a condition as good
as it was before the collision, with interest on the
amount so expended, together with the damages
incurred by reason of the loss of the services of the
vessel from the time of its disability until again
restored to a seaworthy condition, together with such
disbursements and expenses as directly result from
the collision and are incurred on heJwlf of the in-
jured ship in restoring it to the condition in which
it was prior to the injury inflicted. -» * *

Restitution for the loss sustained and no more
is the rule for determining the amount of damages
in case of partial loss." (Italics ours.)

Spencer on Marine Collisions, Sec. 197.

121
The damages claimed by Appellant are as fol-
knvs (R. p. 433) :

Expense for salvage $12,712.20

Expense for repairs - 12,313.00

Depreciation for damage to boiler by snb-

mersion I'^^O-OO

Expense for survey 25.00

Expense for superintendence o.-f repairs 566.67

Demurrage for 139 days at $103.00 per day 14,317.0Q

Value of stores destroyed 100.00

Total - $41,533.87

Appellee does not question the item as to cost of
repairs, and proctor expressly stated that he would
not dispute Appellant's evidence as to their reason-
ableness (R. p. 135). The amount allowed by the
trial court is $12,313.00, which is the amount claimed
•oy Appellant.

The item of $25.00 for survey of the "Kitsap"
was allowed by the trial court and was proper.
The Swifzerlanch 67 Fed. 617.
The Alaska, 44 Fed. 498.
The item of $566.67 for expense for superin-

122

tendence of repairs claimed by Appellant and al-
lowed by the court, was proper and is not contested.

Netv Haven S. B. Co. vs. The Mayor, etc., 36
Fed. 716.

The value of stores destroyed was agreed to be
$100.00, which was allowed (R. p. 141).

The items of the ''Kitsap's" damage which are
in dispute here are the expense for salvage, $12,-
712.20, which was allowed by the trial court; the
item of $1,500.00 for depreciation in the boiler by
reason of being submerged, which was disallowed by
the trial court ; and the amount of demurrage, which
the trial court allowed at $50.00 per day instead of
$103.00 per day, as claimed by Appellant. We will,
discuss these items in their order.

Salvage. Appellee assigns as error the allow-
ance by the trial court of the item of $12,712.20 for
salvage of the "Kitsap." The evidence shows that
the "Kitsap" was sun^ in about 240 feet of water,
and it is alleged in the libel that she was a total loss.
However, by the time of the trial it appeared that
she had been raised and was afterwards repaired, so
that damages as for a partial loss, including the cost
of raising and repairing her and demurrage, were
allowable instead of her value.

123
Appcllnt called S. B. Gibbs as a witness in its
behalf, who testified that he was agent and surveyor
for the San Francisco Board of Marine Under-
writers, residing at Seattle; that he "represented
the underwriters in the matter of the collision be-
tween the 'Kitsap' and the 'Indianapolis' " (R. p.
108) ; that he was the representative "of the under-
writers of the 'Kitsap' " (R. p. 113) ; that after the
collision, on behalf of the underwriters, he made a
contract for the salvage of the steamer, which con-
tract was offered and received in evidence as Libel-
ant's Exhibit C. The contract is an agreement be-
tween the Elliott Bay Dry Dock Company and S. B.
Giggs, "agent for the underwriters of the S. S.
'Kitsap,' " by which the Dry Dock Company under-
took to raise and deliver the "Kitsap" for sixty per
rent of her value when delivered, if the vessel when
raised could be repaired, the repaired value being
agreed to be $35,000.00, which was her value for in-
surance purposes (R. p. 124) ; or if she could not be
repaired at a cost less than this repaired value, then
sixty per cent of whatever amount was realized from
the wreck, by sale, break-up or otherwise. Appel-
•lant, as owner of the vessel, consented that the un-
derwriters might enter into this contract without

124

prejudice to the rights of either party under the
policies of insurance on her.

Captain Gibbs also testified that, in his opinion,
this contract was a fair and reasonable contract for
the raising of the vessel, in the condition in which
she was found (E. p. 109), and there is no evidence
to the contrar}'-. He testified that after the vessel
was raised a survey was had to determine what re-
pairs were necessary to the vessel; that bids were
called for, and a bid of $12,313.00 for such repairs
accepted, whicli he stated was the lowest bid, and in
his opinion a reasonable one (R. p. 110).

Appellant claimed an item of $1,500.00 damage
to the l)oilers of the "Kitsap" by submersion, which
could not be and was not repaired. This amount,
added to the $12,313.00 cost of repairs actually made,
or $14,813.00, deducted from the agreed valuation of
$35,000.00, was the salved value of the vessel, of
which the salvors were entitled to sixty per cent, or
$12,712.20, the amount of salvage claimed by Appel-
lant and allowed by the trial court. Captain Gibb:;
testified that, although this amount had not been
paid at the time he gave his evidence, the under-
writers had obligated themselves to make the pay-

125

ment, and, of course, the ship was liable for such
amount.

Appellee did not offer any evidence to contra-
dict this testimony, nor to show that the cost of
salvage was not reasonable; but it argued in the
court below, and will probably argue here, that Ap-
pellant did not show itself to have suffered anything
by reason of the salvage operations, as distinguished
from the repair bill, because it neither contracted to
nor did it pay out anything for salvage; that certain
persons claiming to have been underwriters entered
into the salvage contract, but that they are not
parties to this case ; and, while if they were under-
writers, they might under their policies be subro-
gated to Appellant's rights, these facts are not
shown, and that no party to the record in this case
is entitled to this item. However, the trial court
allowed this item and we think correctly. As shown
hy the au.thorities al ove quoted, the damage for which
the "Indianapolis'' and her stipulators were liable,
if at all, is the expense of restoring the vessel to a
condition as good as it was before the collision,
which included all expenses and disbursements di-
rectly resulting from the collision, and which were
^'incurred on behalf (^f the injured ship." We think

126

the amount Appellant, as owner of the ship, is en-
titled to recover is the amount of damage sustained
bv the ship, which amount, in the absence of evidence
to the contrary, is presumably the amount paid td
restore her to the condition in which she was before
the collision, besides demurrage for loss of her use.
We do not think it makes any difference whether
Appellant actually paid out any of these amounts,
or whether they were all covered hy insurance, or
whether some one voluntarily raised, repaired and
restored the vessel to Appellant without any cost to
it. To hold otherwise would be to hold that a per-
son or vessel causing damage to another would have
the benefit of any insurance on the vessel, or anv
gift which might Ije made to the owner of the vessel
in connection with repairing the damage caused by
the offending vessel.
Mil
It would-be contended that if Appellant had

made the contract for salvage itself, instead of the
underwriters on the "Kitsap," that the item should
not be allowed. Nor if the vessel had been sold under
the salvage contract. Appellee would not contend
that Appellant could not recover its loss on that ac-
count. If Appellant had itself paid the amount
called for l)y the salvage contract, Appellee would

127

hardly contend that AppcUant conld not recover the
same. If volunteers had salved the vessel, and Ap-
pellant had been compelled to pay the amount in
question, in order to regain her, Appellee would ad-
mit that Appellant could recover this amount; and
certainly if, instead of Appellant actually making
this payment itself in the first instance, the imder-
writers under their insurance contract, either paid
this amount to volunteer salvors, or to salvors under
the salvage contract, and then deducted this amount
from the insurance due Appellant, or left this mat-
ter for adjustment under the policies of insurance,
Appellee and the "Indianapolis" could not be re-
lieved from a payment of this amount to Appellant
PS owner. We do not think it makes any difference
whether the oliligation for salvage, or its payment,
was incurred or made in the first instance by the in-
surers of the "Kitsap," and then adjusted between
the owner and the insurers, or whether the same was
incurred or paid in the first instance by the owner,
and then adjusted between it and the insurer. To
hold in this case that the Appellant cannot recover
this item of salvage, which it is admitted was neces-
sary and reasonable, and the result of the collision,
is to hold that in a collision case an owner cannot

128

permit his underwriters to salve the ship, as they
have a right to do, under penalty of losing the cost
of salvage, which he could collect if he salved the
ship at his own expense in the first instance, and
then collected the same, or such part thereof as he
might be entitled to from the underwriters. There
is certainly no law to sustain such a contention as to
this item. On the other hand, the law is well settled
that it is no defense to an action for damages for
collision that the injured party has received insur-
ance for the damage incurred.

"It is no defense to an action for damages for
collision that the injured party has received insur-
ance for the damages incurred! The party at fault
may not shield himself by showing satisfaction for
the damages received through payment by another.
The insured in such cases may recover as fully as
though no insurance had been received. The insurer,
however, has the right to claim whatever damages
are recovered, the insured being his trustee for an
amount equal to the insurance paid. The insurer
ma}", if he sees fit, maintain an action in his own
name against the vessel at fault."

Spoirrr on Marine Collisions, Sec. 207.

Whether or not the underwriters had a right of
subrogation for the amount of salvage, if any, they
l^aid in this case, makes no difference, liecause, as
stated by Spencer in the last quotation, it is optional

129

with the underwriter wlicther he will claim a subro-
gation for the amount he has paid, or whether he
wdll permit the owner to recover the entire damage,
and hold him a trustee for the amount the under-
writer has paid out under the policy of insurance.

In the case of Fretz vs. Bull, 12 Howard (U. S.)
4(36, the Supreme Court of the United States
squareh^ held that the owner of a boat and cargo de-
stroyed by a collision might maintain an action for
the entire loss, even though he had received from the
underwriters a part of such loss. In that case, the
action was commenced by the owner for the use of
the underwriter, and the court held that it was not
a substantial objection that it was so brought; but,
of course, it was not necessary to state in the action
that it was for the use of the underwriter, because
that might or might not be true, according to the
terms of the insurance contract, which had nothing
to do with the liability of defendant. It was no con-
cern of the vessel at fault who was entitled to the
money as between the owner and underwriter, and
it certainly could not escape liability because the
underwriter had paid the owner a pcu'tion of his
loss. Of course, a recovery by the owner would be
a bar to an action by the underwriter against the

130

offending vessel, and tins is all that the offender is
interested in, so far as this question is concerned.

The Supreme Court of the United States in th^
case of The Patomac, 105 U. S., 630, 634, said:

"The mere payment of a loss by the insurer
does not indeed afford any defence, in whole or in
part, to a person, whose fault has been the cause of
the loss, in a suit brought against the latter by the
assured. ' '

In that case it appeared that by the express
terms of the policies of insurance, the insurers, upon
the payment of the loss, were entitled to demand
from the insured either an assignment of his right
to recover damages against the offending ship for the
loss so paid for, or to bring suit for such damages in
his name, and to hold for their own use such pro-
portion of those damages as the amount insured bore
to the valuation of the insured vessel; and in that
case, the underwriters had released the offender to
the extent of the underwriters' interest in the dam-
age recoverable. Under those circumstances, and in
view of those facts, the court held that the insured
could not recover the portion of damages which it
appeared belonged to the underwriters, and n'hicli
theij liiu] released.

131

Of course, in this case, no such facts appear,
nor does it appear what the respective rights of
the unde^^Y^ite^s and the owners are as between
themselves. Under the rule laid down in these
authorities, Appellant has a right to recover the
entire damage to the ship, which admittedly included
this item of salvage.

"The underwriters upon a ship, A, sunk by a
collision with B, cannot sue B or her owners in their
own names. Their only right of action is by subro-
gation to the rights of the owners of A; and they
must sue in the names of the owners of A."

Marsden's Collisions at Sea, Sixth Edition,
p. 98.

"If the assured, after receiving the amount of
his loss from his insurers, recovers damages from
the wrong-doer in the collision, he is a trustee of
srch c- amazes for the underwriter. But the fact that
the plaintiff in a collision action has been compen-
sated for his loss bv his insurers is no answer to
his claim for damages against the wrong-doer."

Do. pp. 277-278.
It makes nc^ difference in this case whether the
underwriters incurred the obligation for salvage,
themselves, or even paid the amount due for salvage
direct to the salvors, or whether they required or
permitted Appellant to incur such obligation or pay
such salvage, and then reinVoursed Appellant there-
for. We think the authorities are conclusive in this
cpiestion.

132

DAMAGE TO BOILER.

One of the items of damage to the "Kitsap"
claimed b}^ Appellant, was $1500.00 for depreciation
of her boilers due to their submersion. The evidence
shows that after the "Kitsap" was raised, a survey
was made by Captain S. B. Gibbs and Mr. T. W. C.
Spencer (E. pp. 109, 134), for the purpose of ascer-
taining the damages caused by the collision and by
submersion (R. p. 110). An agreement had been
entered into between the salvor, the underwriters and
the Appellant, that in case of any dispute arising on
the survey, such dispute should ])e submitted to an
umpire, whose decision should be binding. Pursuant
to this agreement the question was submitted to Mr.
H. A. Evans, as umpire, as to whether or not the
l)oilers had been damaged by submersion after the
collision, which damage could not be repaired. Mr.
Evans made an award of $1500.00 for such damage
(R. pp. 113, 125, 126).

Appellee did not offer any evidence that the lioil-
ers were not damaged hy the sul^mersion, nor that
the allowance was not a reasonable one; and this
damage was not repaired. Ap])ellant took the ves-
sel, after she was raised and repaired, with her l)oilers
dc^preciated in this amount, under the uncontradicted

133

evidence; and as Appellee was liable for whatever
damage the "Kitsap" snstained becanse of the col-
lision, it seems to us clear and proper, under the evi-
dence, that this item should be allowed. Certainly,
if it was not a proper item to allow against the Ap-
pellee, it was not proper to charge the salvor with its
sixty per cent of the item, and the salvage item al-
lowed in this case should have been increased $900.00.
Because by disallowing the $1500.00 item the cost of
repairs would be only $12,313.00 for those actually
made, which, deducted from $35,000.00, leaves
$22,687.00, of which the salvor would be entitled to
sixty per cent or $13,612.20, instead of $12,712.20
allowed by the trial court. As the judgment stands.
Appellant not only is compelled to take its vessel
depreciated $1500.00 in value after repairs made, but
shoidd pay the salvor $900.00 more than the court
allowed it. The facts all appear in the record here,
and we think the court should either allow the item in
full as claimed, or increase the salvage award $900.00.

134

DEMURRAGE.

It is, of course, conceded that Appellant, if en-
titled to recover at all, is entitled to demurrage for
loss of use of the "Kitsap" from the time of the
collision until she was repaired. There is no dispute
that this time was from December 1, 1910, to and
including sixty working days from February 18,
1911, which would be May 2, 1911, making one hun-
dred and thirty-nine days (R. p. Ill),

The "Kitsap" was being operated by Appellant
upo]i a regular daily run, which Appellant had had
established for about six years, and upon which it
had a contract to carry the mail (R. pp. 135, 136),
for four years from July 1, 1910. It had a right,
and was ]x)und to keep a vessel on this run, both to
perform its mail contract, and so as not to lose its
established business. To do this, it was necessary to
place some other vessel on the run while the "Kitsap"
was being raised and repaired. It did place the
"Hyak," another of its vessels, of like character and
type of the "Kitsap," on the run (R. pp. 136, 138).
It was stipulated that the charter value of the
"Hyak'' was $175.00 per day (R. p. 297), and the
evidence sliowed tliat the cost of her operation was
$72.00 per day, leaving a net charter value of $103.00

135

per day (E. pp. 127, 138) for the "Hyak." It was
further stipulated that the net earnings on the run
during this period, if a material way to determine the
amount of demurrage, were $50.00 per day. The trial
court allowed Appellant demurrage at the rate of
$50.00 per day only, for the 139 days it lost the use
of the "Kitsap," and Appellant assigns as error, the
refusal of the trial court to allow the net charter
value of the "Hyak," or $103.00 per day, for this
period. The undisputed evidence is that the net char-
ter value of the "Kitsap" Avould be a little more than
that of the "Hyak," because of cheaper operation
(R.p. 138).

It is true that the "Hyak" belonged to Appel-
lant, and that at the time she took the "Kitsap's"
run she had no charter or regular run. But we sub-
mit that this fact is immaterial. She might have had
such a charter at any time, as she had had the year
l>efore (R. pp. 138-10), and by using her in place of
the "Kitsap" Appellant lost any chance of such a
charter. Certainly if Appellant had not had a spare
lu.at fit for this run, it could have chartered such a
boat and recovered her cost as demurrage. We can-
not see why a different rule should apply, merely be-
cause it used its own vessel, thereby losing her use

136

otlierAvise. If Aj^pellant had chartered the "Hyak"
from some one else, it could have recovered the net
cost of such charter ; and there is no reason why Ap-
pellee should have the benefit of Appellant's invest-
ment in this substituted vessel, which the undisx^uted
testimx)ny shows was of the value of $50,000.00 (R. p.
125) . To allow Appellant $103.00 per day demurrage
for use of the "Hyak" is only to allow what it would
have had to pay if it had not this investment in the
"Hyak," but had been obliged to charter from others.
It would in no sense be adding to Appellant's profits,
l)ut merely making it whole for the loss of the use of
the "Kitsap."

To show that we are correct in this contention,
let us look at the matter in another way. Appellant
was entitled to ])e made whole, nothing less, nothing
more. If the "Kitsap" had not been lost, it would
have had that vessel to keep the run in question, and
would also have had the "Hyak" open for charter,
with a net charter value of $103.00 per day. By the
loss of the "Kitsap," and placing the "Hyak" on
her run, xlppellaut lost the use of, or chance to use
the "Hyak" otherwise, which was a loss to it of her
net charter value. Appellant could not lie made Avhole

187

unless it recovered that value and maintained the
"Kitsap's" run.

"The fact that another vessel l^elonging to the
same owner was used as a substitute for the disabled
steamer during the time of her detention, should not
militate against the right to compensation, nor afford
just cause for awarding less than would be allowed
if the owner from lack of enterprise, or inability,
failed to have an available substitute for use in such
an emergency."

State of Calif oDiia, 54 Fed. 404, 407.

In the above case, there was no evidence as to
the charter value of the vessel damaged, that this
court determined the demurrage from the only evi-
dence in the case, to-wit: daily earnings. But the
rule we contend for is recognized in that case, which
is supported, and the reasons therefor stated, in this
and the following authorities.

The owners substituted another of their boats
for the injured boat. Held that they had a right to
do this, and "are entitled, therefore, to charge for the
use of their own boat at the market value of its use,
for the time being, precisely as if they had hired her
from other owners." Demurrage to the amount of
the value of the use of the substitute boat was al-
lowed.

New Haven S. B. Co. vs. The Mayor etc., 36
Fed. 716.

138

' ' The true measure of loss from detention under
the circumstances here shown, is the cost of substitu-
tion. When furnished a suitable vessel to take the
place and do the work of the other, her owners are
fully compensated, in this respect. The cost of such
substitute accurately measures the market value of
the other's services. The value of her charters may
not; other considerations enter into this. * * '^
The cost of a proper substitute is therefore the meas-
ure of loss for detention, wherever its application is
practicable."

The Emma Kate Boss, 50 Fed. 545 (C. C. A.
3rd Cir.).

"The best evidence of damage suffered by deten-
tion is the sum for which vessels of the same size and
class can be chartered in the market."

The Conqueror, 166 U. S. 100; also

The North Star, 140 Fed. 263;

The "Potomaer 105 U. S. 630;

The Columl)ia, 109 Fed. 660;

Soeiete etc. vs. 0. B. d- N. Co., 178 Fed. 324.

Under these authorities, and the undisputed evi-
dence and stipulations, we respectfully submit that
the trial court erred in not allowing Appellant de-
murrage at the rate of $103.00 per day for 139 days,
or $14,317.00.

139
INTEREST.

Appellant assigns as error tlie failure of tlie trial
court to allow it any interest on tlie amounts which
Avere found it was entitk'd to.

"In computing the amount of damages to be al-
lowed the partv entitled to recovery, it is proper to
allow interest on the amount expended for repairs
and on the amount of demurrage charges that the
prevailing party is entitled to, from the date when
the various items of expense were incurred, and from
the last day of detention, where demurrage is recov-
ered."

Spencer on Marine Collisions, Sec. 206.

While it has been stated that the allowance of
interest is largely in the discretion of the court, we
think this ride does not apply in a case like this, espe-
cially if, as we have contended, the "Kitsap" was
without fault.

The State of California, supra.

The salvage was due on February 18, 1911, when
the contract for repairs was let (R. p. Ill), so the
amount of salvage could be determined, and we think
interest on the item of salvage should have been al-
lowed from that date.

The cost of repairs was due May 2, 1911, when

140

the vessel was to be turned over to Appellant under
the repair contract, and demurrage was also due on
that date ; we think interest should have been allowed
on these items from that date. The other items of
damage, to-wit : $1500.00 for depreciation to boilers,
$25.00 paid for survey (R. p. 133), $566.67 expense
of superintendence, and $100.00 for loss of stores
were all due on that date, and we think interest should
be allowed on these items also from that time. Under
the decision of the trial court, which was made more
than one year after all these expenses, aggregating
$41,533.87, or $32,666.67 allowed by the court, had
been incurred by Appellant, it lost interest on this
large sum, and penalized that much more than Ap-
pellee, whose damage was small. We feel that in law
and good conscience. Appellant is entitled to interest
as claimed.

141

COSTS.

Appellant assigns as error, the refusal of the
trial court to allow its costs in the lower court.. Of
course, if Appellant is correct in its contention that
the "Kitsap" was not at fault, and Appellant should
have recovered its full damages, instead of having
the damages divided, costs in the lower court should
lie awarded to it.

In conclusion, we wish to say that we have ex-
tended our argument to considerable length, because
Ave feel the importance of the case justifies it, and a
]iroper understanding of the questions involved re-
quires it ; and we respectfully ask this court to give
the evidence the careful consideration we feel is re-
quired in order to understand and determine the facts
of tlie case. We think the memorandum decision of
the trial judge shows that he did not understand the
facts of the case. The case was argued the first part
of November, 1911, l)ut was not decided until May
98 1912. Necessarilv the court had forgotten much
of the argument made <*i#4* months before. All of
the evidence Avas taken before the Commissioner and
reported to the trial court, who, therefore, had only
the type-Avritten testimony before him, and did not
see anv of the Avitnesses. The Commissioner did not

142

make any findings in the case. The trial judge was
therefore in no better position to pass upon the facts
than this court is. It is well settled that in such cases,
in admiralty, this court does not in any way feel
bound by the decision of the lower court, but, being
in as good a position to pass upon the facts, will de-
cide the case as though it had come before it in the
first instance.

The Santa Bita, 176 Fed. 890 (C. C. A. 9th
Cir.).

It is a fact well known to this court, tliat the triai
judge, who heard and decided this case below, prac-
tically all the time after the case was submitted to
him, had the \^'ork of two judges to carry. The rec-
ord in the case is very long, and much of the testi-
mony relates to matters occurring within a short
space of time ; and the question of fault of either ves-
sel depends to a considerable degree upon careful
consideration and comparison of the testimony of dif-
ferent witnesses, the plotting and measurement of
courses, and calculation of speed, the measurement of
angles of cut, and the consideration of other like evi-
dence, which requires considerable laljor and study.

AVe have tried to assist the court in these matters
by our testimony, especially that of witness H. A.

143

Evans, an expert of exceptional ability, to whose tes-
timony we respectfully ask that especial attention be
given.

AVe feel that the memorandum decision of the
trial Judge shows that he did not give the time to
the consideration of the evidence which was neces-
sary to fully understand it; otherwise he could not
have made a finding that the "Kitsap" turned
"around on her regular course," and at the same time
find the point of collision to be more than one hundred
feet away from the nearest point to that regular
course, as shown by Appellee on its own Exhibit 9.
Nor do we think he could have found the "Kitsap"
was travelling at a "high rate of speed," if she was
on her regular course. Xor could he have disre-
garded the testimonv of the witnesses on the "Indian-
apolis" as to her own speed, and based a finding as
to the "Kitsap's" speed on their evidence alone, as
he must have do]:e if the "Kitsap" turned on her
regular course, which would not be in sight in the
log of the frur witnesses on the end of the Colman
Dock. Nor would he have disregarded the testimony
of those on the "Kitsap" as to her speed, but be-
lieved their testimony as to the speed of the "Indian-
apolis." Nor would he have believed the testimony

144

of Appellant's witnesses as to the course of the "Kit-
sap," and disbelieved it as to her speed and the point
of collision. Nor would he have disregarded the
mathematical calculations of Mr. Evans as to the
speed of the "Kitsap" upon her regular course, when
he found the time of the "Kitsap's" departure and
the collision to be as Appellant claimed and as was
not disputed, and the same time upon which Mr. Ev-
ans' calculations were based. All of which could be
easih^ verified hy a little calculation based upon ex-
hibits offered by either party.

For these reasons, and the importance of the
case, we have extended our argument, and attempted
to point out the evidence and where it is found in the
record, to sustain our contentions, to assist the court
in finding and understanding the evidence. We
firmly Ixdieve that after this court has read and con-
sidered all the evidence in the case, it will be fully
satisfied that the "Indianapolis" was ffuiltv of ptoss
negligence, and that the trial court was in error in
finding any fault on the part of the "Kitsap." In
that event, we will be entitled to a reversal, and a
decree for full damages to the "Kitsap," with inter-
est and costs in ];()th courts. AVe also think that our
contentions as to the damages Appellant is entitled to

145

recover, will ])e found sustained l)y the law and the
evidence.

AVe respectfully submit that the decree of the
lower court should be reversed, and a decree entered
for Appellant's full damages as claimed, with interest

and costs.

W. H. BOGLE,
CARROLL B. GRAVES,
F. T. MERRITT,
LAWRENCE BOGLE,
Proctors for Appellant and Cross- Appellee.

IN THE

United States
Circuit Court of Appeals

FOR THE NINTH CIRCUIT

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a corporation,
Appellant and Cross-Appellee,

vs.

STEAMSHIP -INDIANAPOLIS,"

her engines, boilers, tackle, apparel / ^^- ^^^^

and furniture.

Respondent and Appellee,

INTERNATIONAL STEAMSHIP
COMPANY, a corporation.

Claimant and Cross-Appellant

APPEAL FROM THE UNITED STATES DISTRICT COURT, FOR THE
WESTERN DISTRICT OF WASHINGTON. NORTHERN DIVISION

Brief of Appellee and Cross- Appellant

IRA BRONSON,

Attorney for Appellee.

SEATTLE, WASHINGTON

In the United States Circuit Court
of Appeals

FOR THE NINTH CIRCUIT

KITSAP COUNTY TRANSPORTA-
TION COMPANY, a corporation,
Appellant and Cross-Appellee,

vs.

STEAMSHIP -INDIANAPOLIS," ,

her engines, boilers, tackle, apparel ^o. Zi«d

and furniture.

Respondent and Appellee,

INTERNATIONAL STEAMSHIP
COMPANY, a corporation.

Claimant and Cross-Appellant

APPEAL FROM THE UNITED STATES DISTRICT COURT, FOR THE
WESTERN DISTRICT OF WASHINGTON. NORTHERN DIVISION

Brief of Appellee and Cross-Appellant

STATEMENT OF THE CASE.

The cross-appeUant, who in the interest of brev-
ity wiU designate itself as the appeUee, is content with
the statement of the case made by the appellant so
far as it relates to the pleadings, and no further. The

statement made by the appellant as to the decision
of the court below might better have been omitted,
or else the full opinion of the court recited. Appel-
lant's statement falls into a very common error of
brief writers, namely: the assertion that the other
side '^ admits this and that;" or that ''such and such
are not disputed;" and the statement includes a great
man}^ things which counsel for appellant may think
are true, but which are not undisputed and which are
not admitted, and which we contend are not true.
We desire to amend appellant's statement in a nmn-
ber of points. We note the contention of the appellee,
that the size of the two vessels was by us claimed
to be and evidence was offered to prove them to be,
not only greater in weight for both ships, but that a
greater disapproportion existed between their
weights than claimed by appellant. The materiality
of this evidence being its effect upon statements of
witnesses as to the extent of the damage which a ves-
sel of the size, form and weight of the "Indianapo-
lis" would do to a vessel of the size, form and weight
of the "Kitsap," if the "Indianapolis" were pro-
ceeding under any considerable headway ; and as we
shall argue later, any considerable headway would
have driven her through the "Kitsap" under such
circumstances. We desire to correct the statement at

the end of the first paragraph on page sixteen of ap-
pellant's brief with reference to the distance between
the south side of Pier Four and the north side of the
Colman Dock ; and to submit that in our opinion the
evidence shows the distance to be over eight hundred
feet, to be exact, eight hundred and twelve feet. This
is material, as will be hereafter argued, as every ad-
ditional one himdred feet that the Kitsap had to trav-
el in order to reach the collision, which subsequently
occurred within a given time, increased her speed. We
desire to take issue with the second paragraph on
page sixteen of the statement of the case, by stating
more fully the exact facts.

The regular course of the ''Kitsap" was to back

away free handed from the north side of Pier Four,

turning on a port helm as she came ahead, southerly

and southwesterly, to turn in an opposite direction on

her course. On leaving her dock on the trip which

resulted in the collision, she backed away from the

south side of Pier Four, which not only brought her

the width of the dock further south, but she had to

swing aromid the end of the dock before she could

even complete her backing up movement, and this

also is material. We desire to correct the statement

at the bottom of page sixteen in so far as the same

is asserted to be undisputed, "that a very dense fog

liimg over Elliott Bay." This evidence is not onl_y
disputed, but as we shall point out, the chief wit-
ness and principal owner of the "Kitsap" will be
shown to have disputed it, if it applied to the whole
bay. It was undoubtedly much heavier on the Seat-
tel shore, mingled as it was with the city smoke, and
was thinner, extending into waves and patches, and
finally cleared entirely as the harbor was left.

We desire to correct the statement of the appel-
lant contained in the last six lines of the first para-
graph on page seventeen. It is not admitted ; it is not
undisputed, that the Indianapolis struck the "Kit-
sap" as distinguished from the "Kitsap" striking
the "Indianapolis;" it is not undisputed that the
"Kitsap" sank in about twenty minutes; and we
submit that the great weight of the evidence was that
she sank in a much less time ; and that, in a period of
time ranging between five and ten minutes.

As supplementing our correction of appellant ^s
statement of the case, we desire to add, that it is our
contention that the facts in this case, when stripped
of speculation and the wildest kind of guess work,
will show that the steamer "Kitsap," after having
left the north side of Pier Four on the afternoon in
question, proceeded at a rapid gate out into a foggy

condition on the bay and struck and sank a launch,
drowning one man; that she returned to her dock,
landing, however, at the south side; and within a
short space of time was ordered by her o\vners to
proceed upon her course ; and that she this time back-
ed out into the fog and headed south along the face of
the docks to the southward of the Colman Dock, mak-
ing a wide and deep sweep into the bay, crossing go-
ing south, where she had not the right of way, the
path of in-coming vessels, among which was the
"Indianapolis," which was by her master and mate
knowa to be then due and over which apprehension
was keenly felt by both mate and master; that she
finally swung northward and northwestward; and
after proceeding a minute in a northwesterly direc-
tion sighted and struck the "Indianapolis;" and was
sunk, and was subsequently foimd where she sank,
and where one of the chief witnesses of the libelant
said she was found, to-wit: ''off the Colman Dock."
If we satisfy the court of this one fact, we have but
to call the court's attention to the admission of her
master, that if she did such a thing she did a highly
dangerous thing, and we have established her negli-
gence beyond recall. And we shall argue that this
negligence consisted not only in violating the rules of
the road, (if they apply to a crossing in the fog), and

in turning a dangerous course in a fog, but that the
distance she had to travel between two given periods
of time, established as her time of departure and the
time of collision, would have necessitated her pro-
ceeding at a high speed from the dock to the point of
collision.

As to the right of way and the application of the
crossing rule, we are aware that upon sound principle
and supported by decisions, they do not apply in a fog
for the reason that vessels can not then de-
termine each other's course. It may be said
in this case, however, that if they should ever
apply in a fog here is the case, because as the ''Kit-
sap" started out down the water front with the docks
on her port side, she knew that she had all inbound
vessels on her starboard hand.

We submit that the competent and credible evi-
dence heavily preponderates in favor of the fact
that the "Indianapolis," after passing the Duwamish
beU buoy, while in misty weather, traveled at her
usual full speed for five minutes, during which time
the captain could see vdth a fair degree of safety
far ahead of the point within which he could stop
the ship and during that time traveled one and one-
fourth nautical miles. That he then in successive

stages slowed Ms ship, until at the time of collision,
she was practically at a stand still and was not under
sufficient headway to have caused any serious dani-
a2:e from her own motion.

In this connection the fog signals of the two
steamers should be taken into consideration. It is
contended by the appellee that the signals of the
"Kitsap" were heard first on the port bow of the
"Indianapolis" and then ahead; and that she was
supposed to be passing ahead of the course of the
"Indianapolis ;" and then that the signals turned and
were heard from off the starboard bow and rapidly
approaching.

Counsel for appellant argues that it is difficult
to accurately locate sounds in a fog, and seeks to ap-
ply this fact to the evidence of the appellee. He ap-
parently, however, reasons that sounds in a fog
heard by the appellant's witnesses were not subject
to this element of frailty.

The appellee contends that the finding of the
court below that the collision resulted from any
fault on the part of the "Indianapolis" is not sus-
tained by the evidence.

The appellee further contends that even if the
collision did result from mutual fault, that the ef-

fort of the appellant to more than recoup its loss and
to make a profit out of its accident at the expense of
the appellee, wholly warrants the appellee in insisting
that the record in this cause does not show that any
party to this record has suffered any loss or damage
by reason of the salvage operations which were un-
dertaken in raising the ''Kitsap ;" and that the court
below erred in allowing the item of $12,712.20 for sal-
vage.

In maintaining the appellee's appeal the fol-
lowing formal specifications of error are relied upon :

That the court erred in finding and decreeing
that the collision mentioned in the pleadings between
the steamer "Kitsap" and the steamship "Indianap-
olis," resulted from the mutual fault of said steamer
"Kitsap" and said steamship "Indianapolis," and
in refusing to find and decree that said collision re-
sulted from the sole fault and negligence of the said
steamer "Kitsap."

II.

That the court erred in finding and decreeing in
said cause that the damage resulting from the collis-
ion mentioned in the pleadings therein, should be di-

vided, and that tlie libelant should recover one-half
of the damage sustained by it and resulting from said
collision; and that the cross-libelant and respondent
should pay to the libelant one-half of the damages to
said steamer "Kitsap" found to have resulted from
said collision, and in refusing to award to the cross-
libelant and respondent all of the damages resulting
to the steamship "Indianapolis" from said collision.,

III.

That the court erred in allowing to the libelant
in any event any part of the sum of twelve thousand
seven hundred twelve and 20-100 ($12,712.20) dol-
lars for the salving of the steamer "Kitsap."

IV.

That the court erred in not awarding to the cross-
libelant and respondent the full damages sustained by
the cross-libelant and respondent for all of the in-
juries, demurrage and loss resulting from said col-
lision to said steamship "Indianapolis."

ARGUMENT.

In the opinion of the appellee this whole case
hinges sharply and clearly upon the place where the
collision occurred As this point is a controUing fea-
ture in determining the previous speed of the "In-

dianapolis" and hoth the course and the speed of the
'^ Kitsap" previous to the collision. The ''Indian-
apolis" had to proceed eastward to this point from
the bell bnoy, within the time covered by the evidence
and the ''Kitsap" had to proceed southerly and west-
erly and northerly upon a course within the tim.e
given in the evidence, to reach this point. As to its
distance from the Colman Dock, the court will have
to rely upon rather approximate estimates. As to
the fact that it was off the Colman Dock and in line
between the Colman Dock and the bell buoy, we think
it is futile for the appellant to dispute If we are not
mistaken the only witness of the appellant who pre-
tended to locate the place where the "Kitsap" was
found was Capt. S. B. Gibbs, who in answer to the
question of counsel for the appellant as to whether
she was found "off the docks at Seattle," answered,
"Yes sir, off the Colman Dock." (R. p. 108.) Coun-
sel all through the record refers to "off the docks."
His witness said: "Off the Colman Dock." If it
were necessary to supplement the evidence of the ap-
pellant, the appellee introduced in evidence photo-
graphs taken from the south side of the Colman Docl^:
of the dry dock anchored to the wreck of the "Kit-
sap" before she was raised, which photographs were
sighted along the straight edge side of the house of

the dock, and which show the barge straight out in
front (and they incidentally show the "Indianapo-
lis" as she proceeded across the bay). These photo-
graphs being claimant's Exhibits 5, 6, 7 and 8. Taken
in the order of their numbers they show the approach
of the "Indianapolis" and her necessary detour to
avoid the dock in question, as testified to by the wit-
ness Burns. (R. p. 184.)

We are mindful of the inevitable dispute which
arises in collision cases between opposing witnesses
as to the speed, and oft-times the course, of both
vessels; and that courts invariably discount heavily
the evidence of witnesses based upon their experi-
ences under the excitement of an impending collis-
ion.

The stage in this case in this respect was amply
set and the characters were properly attuned thereto.

The "Kitsap" less than half an hour before had
been out in this same fog; had, as we shall hereafter
argue, had been proceeding at a high rate of speed;
had overriden and sunk a launch and drowned a man ;
had seen fit to turn about to come back to her dock;
and had been again sent out into the same fog. In
spite of the protestations of her master, we confi-
dently assert she was being navigated by men who

must, with ordinary humane instincts, liave been, at
least, upon some nervous tension. Her passengers
and crew must have shared to a certain extent this
feeling, and their perception of the facts attending
upon the immediate approach of the two vessels must
undoubtedly have been more or less warped thereby.

The effect of this is well illustrated in the evi-
dence of the mate of the "Kitsap," who testified that
the '^Kitsap" was going about four miles an hour.
(R. p. 68.) That she was running four or five miles
an hour; going very slow. (R. p. 69.) Who testified
on (R. p. 76) that he asked the captain if he had
"hooked" her on; and that his reason was that he
wanted to know whetJier or not she was going full
speed or going slow; and what he was doing; and on
(R. p. 77) testified: "No I do not know how fast we
were going." And on (R. p. 74) that the captain was
not as calm as he was before the previous accident.
In fact the evidence of the mate of the "Kitsap"
and of the master of the "Kitsap, " shows that neither
one of them knew how fast she was going; and that
neither of them knew which way she was going, other
than she was swinging on a port helm, not having
looked at the compass or having observed surround-
ing land marks.

If frankness call upon ns to admit tbat the same
fog conditions and the impending collision would pro-
duce the same effect upon witnesses on the "Indian-
apolis," we shall certainly he entitled to claim that
this want of reliahility would naturally be less in the
absence of the first tragedy attending the ''Kitsap ;"
and in the fact that the "Indianapolis" had been un-
til she entered the harbor in absolutely clear weather ;
and that her course was visible to her master for all
practical purposes for the first mile and a quarter.
Taking then into consideration the frailty of evidence
as to course and speed of passenger and crew who
stand in a fog and look ahead, we come to a consider-
ation of the tangible evidence of a more reliable
character as affecting the course of the "Kitsap."
Pour witnesses, all experienced, and one thoroughly
disinterested, one a shipmaster, and one acquainted
with the water front and vessels^ as an officer and
manager for many years, to-wit: Brydson (R. pp.
196, 197, and 198), Burns (R. pp. 181, 182 and 183),
aieason (R. pp. 229, 230 and 231), and Tucker (R.
pp. 224, 225, 226, 227, 228 and 229), swear positively
that they saw the "Kitsap," which they knew and
recognized, passing south across the face of the Col-
man Bock previous to the collision in question. They
were standing there in anticipation of the arrival of

the ''Indianapolis;" they knew the "Kitsap;" they
heard her whistle; they saw her as she passed; they
remarked upon her speed among themselves; and
they all say that she was going fast. Their estimates,
of course, naturally do not exactly coincide; they
range from ten to twelve miles an hour. The accur-
acy of their judgment as to her exact speed is not the
vital thing; the exact course she was steering is not
the vital question; if she was steering a course
south of the Cohnan Dock, whether she was swinging
or whether she was going straight across the face of
the dock ; in other words whether her helm was amid-
ship or at port, or how hard aport is not the vital ques-
tion ; the vital question is if she ivas steering the
course they testified to, or an approximate course
thereto, she was making a southerly distance
from her point of departure, which it was
impossible for her to make up except at a
high speed and that is the question which
cannot be gotten away from. The appellee introduced
k drawing or sketch, being claimant's Exhibit 9 in
illustration of our contention as to her crossing the
course of the "Indianapolis." We shall have occas-
ion hereafter to call the court's attention to the fact
that this drawing with a course marked "Course of
'Kitsap' December 14," and "ordinary course of the

'Kitsap,' " is not drawn to a scale, nor does it par-
take of any highly technical appearance of being ac-
curate. The course of the "Kitsap" may have been
flatter; it may have been sharper; it may have been
deeper; it may not have been so deep. It was not
pretended at the time by counsel for cross-appellant
that he could draw the exact course of the "Kit-
sap;" all we claimed for it is, that it illustrates
some such course as she must have taken, in that
this course went a considerable distance south
of the Colman Dock and south of the course which
the "Indianapolis" would have to steer from the bell
buoy to the Cohnan Dock; and that it came north
again and crossed this course a second time We feel
quite sure that if we have not made ourselves plam in
this respect to the appellant, we have made ourselves
plain to the Court.

The four witnesses above referred to were of-
fered to prove the general course of the "Kitsap"
south of the Colman Dock, and as nearly as they could
estimate it, her speed. They were standing on the
dock waiting for the "Indianapolis." Counsel for
the appellant in cross-examination tried to pin them
down to exact estmiates of time upon which they had
not been asked to testify; which were not material
from their standpoint, and which they expressly de-

clined to vouch for, but, after considerable hectoring,
he managed to obtain estimates from them as to how
long the '^ Kitsap" may have been in view.

The court knows that when a man under such cir-
cumstances is finally induced to make a guess and
says a minute, half a minute or three-fourths of a
minute, he is guessing pure and simple. He does not
pretend to be doing anything else ; he does not stand
with a watch in his hand under such circumstances
and count the seconds; and we submit that this evi-
dence which is so vital to the contention of the appel-
lant and which in the absence of any impeachment of
these witnesses, would seem to be so conclusive upon
their having seen what they said they saw, is com-
pelling beyond question.

We come next to one of the witnesses of the ap-
pellant, Charles Wallace, who, was, at the time of the
trial, employed by the appellant ; and who is one of the
two witnesses of the appellant who testified to the
course of the "Kitsap" from having seen land marks
(and it will be remembered that no witness testi-
fied to her course based upon having seen her com-
pass). He testified: "I do not think I looked at
the arand Trunk Dock after we had it abreast of us.
I am sure I did not." And a little later: "I do not

think jou coiild distinguish an object more than two
hundred feet." And still later : "That it was abeam
and was a little closer than two hundred feet." (R.
p. 331.) This witness was the mate of the "Re-
liance," and claims to have steered a parallel
course with the "Kitsap" and to have steered upon
some degree of port hehn. He ties his evidence
with the officers of the "Kitsap," showing that the
course they clauned to have steered was such as must
have taken them south of the Grand Trunk Dock, and
necessarily the inference is that the course continued
on the same degree of curvature, because otherwise
not having looked at the compass they would not
know where they were. The appellee introduced a
drawing, Claunant's Exhibit "Fifteen," based upon
the evidence as to the course steered by the "Kitsap"
and the "Rehance," starting off Pier Four and main-
taining such a course and such a degree of curvature
as would bring them within one hundred feet and
two hundred feet, respective^, of the Grand Trunk
Dock; and they must have been within one hundred
or two hundred feet according to the evidence of the
witnesses in order to see the dock. This map is
drawn to scale and with mathematical precision. It
was identified by a civil engineer, C. W. Bronson,
whose evidence appears at (R. pp. 424 and 425), and

which proves beyond contradiction that if these ves-
sels, or either of them, steered such a course as en-
abled them to see the Grand Trunk Dock abeam, and
one hundred or two hundred feet away, that the}^ went
south of the Cohnan Dock before the}^ got on a north-
erly course.

In passing we desire to call the court's attention
to the utter unreliabilit}^ of witness Wallace with ref-
erence to the course steered. For instance he admits
that no seaman or anybody else can tell how a vessel
is headed when she is steering in a fog, and without
looking at the compass, and when one has no objects
to determine his course from. (E. p. 332.) He also
admitted that his estimate of the course he steered on
the day in question was based upon his having steer-
ed it at previous times; and later in answer to the
question: "So that you do not know what course was
actually steered?" he replied, "No sir."

Another witness, Shaw, whose evidence begins
on (R. p. 318), testified to having been a passenger on
the "Reliance," and that they went so far south that
he could see the fireboat ; and the fireboat slip is iden-
tified as being immediately adjoining the Grand
Trunk Dock; and a reference to Claimant's Exhibit
Four will show that it is set away into the shore, so

that the eyidence of this witness would tend to finally
clinch that of the witness Charles Wallace to the ef-
fect that the ' ' Kitsap ' 'and' ' Eeliance, ' 'while they may
have been steered upon a port helni, were not steered
with a helm hard a port, but were flattening the course
out so as to be proceeding practically at right angles
to the water front; and Claimant's Exhibit Number
Fifteen applies all the more strongly to the evidence
of the witness Shaw. He further admits that his idea
of the course steered would simply be an approxi-
mation along the line of a previously steered course.
(R. p. 324.) The value of his evidence may further
be shown by his statement, "That he could see the
range light of a vessel five hundred feet in the fog;
and that he could hear a man's voice a thousand feet
in the fog; and that he did not look at the compass;
and that he did not know what the captain of the "Re-
liance" did with his helm when he stopped the boat
on one or two occasions. (R. p. 325.) This witness
had been called upon to identify the course of these
vessels and his evidence was seriously presented to
the court for that purpose, and yet, on (R. p. 326) he
says that he does not know what the scale is ; does not
know what the diameter of the proposed circle on the
map was; did not known how far it would be to the
end of the dock from the point of collision, and fin-

ally wound up on (E. p. 327) by saying that the course
represented a curved line and he supposed that was
what they were steering. Furthermore the court can
see what a dramatic witness he was when at the bot-
tom of (R. p. 319) he said he heard Captain Hansen
of the "Kitsap," supposedly a thousand feet away
say: "For God's sake throw that rope," and that he
recognized Henry Hansen's voice. How well posted
he had been as to the issue that the appellant was try-
ing to make is very suggestively shown on (R. p. 320),
where he testifies in answer to the question: "Did
you notice at this time how far south she wenf?"
"Well she seemed to go— he drifted away from the
dock so it seemed to me as though he was afraid of
going south."

It is in evidence in this case that the faster a
vessel travels the flatter her degree of curvature will
be, and this exactly explains the evidence of appel-
lant's witnesses who base their idea of course on the
day in question upon previous occasions, because she
was going faster at the latter date and therefore de-
scribed a larger circle.

The appellant introduced the evidence of one
Lieutenant Stewart which appears at (R. p. 298) to
the effect that he did not see any vessel pass the Col-

man Dock. Considering the ease with which wit-
nesses may be produced who have not seen anything,
it might be surprising that appellant did not secure
more evidence of a similar character. It might be
ever so truthful, but it has little, if any, weight, as
the fact that a hundred men did not see a thing would
not disprove the evidence of one man who did see it.
This might result from inattention ; lack of interest,
looking the other way, and anyone of a thousand
similar reasons; and the fact that he afterwards
heard whistles would not prove that a vessel sound-
ing the whistles had not previously passed down the
water front even within his range of vision if he had
not had occasion to look at her.

One other witness was produced by the appellant
to attempt to off-set the overwhelming evidence of
the appelle to the effect that the ''Kitsap" did go
south of the Cohnan Dock. The witness Hill, whose
testimony begins at (R. p. 405), testified that the
vessel that he saw was lying at the west end of the
Galbraith Dock, which is Pier Three. He then cor-
rected his evidence to say Pier Four. He did not
correct it, however, to say that she was l}^ug on the
south side of the dock, and the evidence of the libel-
lant in this case is that the vessel which was lying at
the end of the dock was the ''Reliance'' above re-

ferred to, so that the vessel which this witness saw
was evidently the ^'Reliance." The court will ob-
serve in reading the evidence that the "Reliance"
and ''Kitsap" are by a number of appellant's wit-
nesses said to have gone out together. This witness
said he did not see the "Reliance." This witness
further testified at (R. p. 409) that when he saw the
vessel which he did see leave her dock, she was five
hundred yards away ; and yet the appellant asks the
court to believe as to everj^ other witness in this case
that you could not see more than one hundred feet or
at most, two hundred feet in this dense and heavy fog.
Comment on the distance of the two docks apart is
unnecessary.

Before briefly taking up the question of the
speed of the "Kitsap" from a standpoint of the ob-
servation of witnesses on the vessel, we wish to call
the court's attention to what we deem a very much
more important admission as to her speed as con-
tained in the evidence of her master. Her master tes-
tified that this previous collision with the launch took
place off the Mud Chute about three or four minutes
after he left the dock the first time. (R. p. 40 and 41.)
He did not see the Mud Chute, but he arrived at this
problematical location from the time he had been on
his course ; and he says that he was proceeding at that

time under a slow bell, which is the bell he says he
was proceeding under when he went out to meet the
' ' Indianapolis. ' ' We are perfectly willing to assume
that what he says to be the time is only approximately
correct. The important point is that he thought and
testified that at what he called a slow bell, he had
made a distance away from his dock and south and
around on his course to a point approximating the
Mud Chute. We have had the distance on the water
front measured by a civil engmeer, and it is found
that the distance from the south side of Pier Four to
the Mud Chute is three thousand four hundred and
seventy-two feet. (E. p. 426.) As she was going
south when she started, she must have traveled at
least that far north in addition to her curve. If this
is Captain Hansen's estnnate of where he would be
under a slow bell in three or four minutes, he was
traveling substantially ten miles an hour. Can we
escape the conclusion that this was the speed that he
was making when he testified that he thought the first
collision was off the Mud Chute; because the time he
had taken and the speed he made would place him
there.

He also testified that he had been about a min-
ute on his course for Four Mile Eock, after turning
in the bay, when he stopped his engines previous to

the collision. Whether he meant exactly a minute, or
substantially a minute, or even a half a minute, he
must have spent some time on this course ; and even
at five miles an hour, in one minute he would travel
four hundred and forty feet; therefore if he pro-
ceeded on his course northerly or northwesterly as
much as a minute at five miles an hour, he had to
travel from a point four hundred and forty feet south
of the point of collision before he got to the place
where the collision occurred and the vessel sank. If
he was traveling ten miles an hour, he had to travel
twice that far. Without attempting to split hairs,
we cannot escape the conclusion that under his own
evidence he had traveled a Yerj considerable distance
northwesterly to the point of collision.

We do not believe the court would be assisted
by a long running commentary on the credi-
bility of the witnesses who testified to the
speed of the "Kitsap," or the speed of the
"Indianapolis" at the time when they were
approaching each other. They are diametrically op-
posed to each other and not as appellant says on page
thirty-three of his brief, "all on one side." Some of
appellant's witnesses claimed, that the "Kitsap" was
not under any considerable headway; one of them
said that she was going astern, which as a matter of

fact necessarily contradicts all of the other witnesses
of the appellant, because if she was going astern and
the "Indianapolis" was headed for her pilot house
when first seen, she would have struck forward of
her pilot house when the collision occurred. In cor-
rection of the statement of appellant upon page thir-
ty-three of his brief, we cite the evidence of Allen
McDougal (E. p. 276) ; Penfield (E. p. 167) ; Walker
(E. pp. 267 and 279), and Eodgers (E. p. 270). As
to the accuracy and credibility of those witnesses who
attempted to testify to her course and speed, we de-
sire to draw the court's attention for the purposes of
comparison to the following points. Captain Hansen •
said he left the dock a few minutes after 4 :00. (E.
p. 27.)

"Looked at the clock and it was exactly one min-
ute past four. " (E. p. 40.)

"When I backed out and came ahead I did not
hear her, I thought I was safe." (E. p. 47.)

"The collision occurred around 4:39 or 4:40."
(E. p. 37.)

"I looked at the clock when I came ahead on my
course."

Q. "When you straightened out on your course
before the collision?"

A. "Yes sir."

Q. " And it was then 4 :39 r '

A. "No, I left the dock at 4:35, and coming
ahead it was about 4:36."

Q. "It was not when you straightened out on
your course, but when you went ahead from the
backing ? ' ^

A. "Yes sir."

Q. "That was the last time you looked at the
clock."

A. "Yes sir." (R. p. 48.) •

Q. "Did you testify before the Inspectors, 'I
only looked at my watch when we backed away from
Pier Four at 4:35?' "

A. "Ilookedat my clock. I never looked at my

watch too."

Q. "Did you so testify?"

A. "I suppose I did. I don't know." (R. p„
55.)

The witness shows that his whole idea of dis-
tance and course was based upon his estimate of time
that was elapsing, and because he made that turn
right along every day. And he further admits that
the direction of fog signals in a fog cannot be accur-
ately determined ; and that he did not know whether
the signals of the "Indianapolis" indicated that she
was crossing his bows or going parallel with them.
(R. p. 53.) On (R. p. 56) he admits that the esti-
mates he figured out on this occasion were testified to
very largelj^ from previous experiences. The master

and the engineer of the "Kitsap" had an interesting
discussion between themselves in connection with the
fact that the master ordered the "Kitsap" to proceed
at faster speed, and the reliability and accuracy of
the evidence of one, or either, or both of them, is well
illustrated on (E. p. 65) where the engineer after
disputing the statement of the master on the witness
stand in a previous hearing said: "The captain and
me talked it over afterwards and I came to see that
he did ring the bell."

Mr. Welfare, mate on the "Kitsap," whose tes-
timony begins on (R. p. 65) was also a very interest-
ing witness. He seems to have been more cautious
than the captain, as appears from the way in which
he advised handling the ship. (R. pp. 70 and
71.) He said on (R. p. 71) that he thought that the
"Kitsap" had but little headway. He testified on
(R. p. 75) that he asked the captain if he had hooked
. her on; meaning had he rung the jingle; and on (R.
p. 76) that he wanted to know if she was going full
speed or going slow and what he was doing; and at
the top of (R. p. 77) that he did not know how fast
they were going, and that he got his ideas from the
captain; and that he knew that the "Indianapolis"
was due, and ought to be coming; and that he warned
the captain that the "Indianapolis" was coming and

30'

we will have to keep a lookout for her, and that the
captain told him that he was kee]3ing her over a little
so that they would be sure and clear the "Indian-
apolis." The question arises, if they were north of
the "Indianapolis" why did they need to keep her
over ? He knew what the captain meant and what he
meant, but when it became apparent that he was
becoming dangerously frank, he took instant advant-
age of the suggestion of counsel and said he did not
know what the captain meant.

If this estimate of his o\^ti speed is thus proven
to be so worthless, how much credit is to be given his
estimate of our speed?

Ole Tongerose, deckhand on the "Kitsap", on
(R. p. 80), judged that they left about 4:30, because
that was when the "Eeliance" left, and the "Re-
liance" was there when they left; and he does not
know when she did leave ; and a little later he heard
the captain say she was on her course, and then a
little while afterwards he heard the "Indian." On
(R. p. 80) he says he heard her about as close as he
could get it about two points off the port bow; and
when he saw her she was four points off the bow;
and the two vessels were not meeting at right angles.
He further testified that he heard the "Indianapolis"

whistle five or six times; and he heard it about five
minutes before the collision. (R. pp. 86 and 87.)

If these are the things he was offered to prove
and if these things are true, what of all the rest of
appellant's evidence as to the time and direction of
the "Kitsap's" course; and if the vessels were meet-
ing at an angle of two points, how fast did the "Kit-
sap" have to move to raise the position of the "In-
dianapolis" from two points on the port bow to four
points on the port bow?

Thomas E. Foster, whose evidence begins on (R.
p. 89) was a brilliant illustration of ignorance and in-
accuracy, whose evidence as to the handling of the
"Kitsap" can best be commented upon by calling at-
tention to the fact that although he had been eight or
ten years to sea, yet on (R. p. 90), he says that he
did not know whether the "Kitsap" was struck on the
port or starboard side; and by the statement at the
bottom of (R. p. 95) as illustrating his idea that she
was at rest when the collision occurred, he stated
that her engines had been backing four or five min-
utes. This was before the commissioners. On (R. p.
96) he changes the minutes to seconds. He further
testified that the "Kitsap" was on her course saying:
''Ee must have leen on Us course to be going straight

ahead." And after testifying that he knew she was
going straight ahead. He first said she had no list on
her and then admitted that he was not looking over
the bow and said: ''She might come over a little."
On (R. P20. 100 and 101) he admits that he does not
know what he testified to on the previous hearing.

Otho Anderson, whose evidence begins on (R, p.
101) was a fireman on the "Kitsap ;" and in addition
to being a general handy man, as a witness, carried the
log of the engine bells in his head, as sho^^Ti on (R.
p. 102 and 103), before this accident took j^lace, and
before anything occurred which would naturally oc-
cur to fix it on his mind. It may be also noted that
it was naturally not his business to remember the
bells and yet on (R. p. 105) he undertakes to say that
he could recite the bells from memory on any given
trip of the boat. He explains this on (R. p. 105) by
saying that he was looking for another collision.

M. D. Jackson, a witness called for the appel-
lants, whose testimony begins on (R. p. 301) at-
tempted to defuie the course of the "Kitsap" from
his position on the deck of the "Reliance," saying
that they completed the turn or the curve of the "Kit-
sap, ' ' but says that the ' ' Kitsap ' ' did not go south of
the "Reliance;" and he further attempted to define

a previously prepared course of the "Kitsap" on
appellants' Exhibit "J." Mr. Jackson is a real
estate agent. Upon cross-examination he was asked
if he looked at the compass and said no ; and upon (E.
p. 305) upon being pinned doAvn to it, in answer to
the questions, "Would you undertake to say that you
could tell when she was going north after, she had
turned on her course there," answered, "No, I would
not;" "Or west," answered "That would depend on
how far I was from the harbor." He further testi-
fied that he could see the docks for two or three min-
utes, and all the time the vessel was turning. Further
comment would seem to be unnecessary. Yet later on
on (R. p. 306), after having identified the supposed
point of collision, he admitted that he did not know
how far out from the dock it was ; and that he did not
do anything to try to locate it ; and further that he
did not know how far out she steered a course on a
curve. On (E. p. 307) he said that the vessels were
three hundred feet apart when they began to diverge ;
this in a dense and heavy fog, which the appellant
reiterates over and over again; and on (E. p. 308) he
says that the "Kitsap" and "Eeliance" were runnmg
parallel courses; and on (R. p. 309) he admits what
is the foundation of all of this class of evidence, name-

ly : that he supposed she steered the same course this
day that she had steered on previous occasions.

The appellant attempted to avail itself of the evi-
dence of C. C. Kurin, whose evidence begins at (R.
p. 309), and of Mr. F. L. Evans, whose evidence be-
gins at (R. p. 312). The two witnesses contradict
each other so squarely as to well illustrate the con-
tention of the appellant that the direction of sounds
in a fog is always disputed ; and the sum of all of this
class of evidence amounts to proving that there was
a collision somewhere out in the bay, a fact which we
do not dispute.

Mr. W. L. Gazzam, whose testimony with respect
to the movements of the ''Kitsap" appears at (R. p.
336) attempted to give the course and speed of the
"Kitsap." Upon cross-examination, however, Mr.
Gazzam, like every other witness who testified as to
the course and direction of the ''Kitsap," save only
those who saw the docks and passed them on the course
which is proven would take them below the Cohnan
Dock, did not look at the compass ; did not know of
his own knowledge what course was being steered in
the fog ; and therefore proves nothing by his supposi-
tion. In fact on (R. p. 342) he testified that he rarely
rides in the pilot house and knows very little about

navigation, but he did say that he saw the docks for
probably two minutes; and if he saw the docks for
tii'O minutes, he had to be going parallel with their
face or on a course, which was not rapidly di-
verging from a parallel line with these docks, be-
cause otherwise if at a rate of four or five miles an
hour, Mr. Gazzam's range of vision, like all the other
w^itnesses', would have been lost in a half a minute
at the outside. He admits (R. p. 342) having seen the
same Grand Trunk Dock. Mr. Gazzam testified that
the two boats were making about the same speed, but
he unfortunately got the "Reliance" across the bay
in eighteen or nineteen minutes including one stop,
or two stops, according to the evidence of appellant's
witness, Shaw, (R. p. 219), the ordinary time
being ten or eleven minutes. If, as appears
from his evidence (R. p. 346) the ordinary time
of the ''Reliance" on which he was traveling to
the bell buoy at Duwamish Head is ten or eleven min-
utes, traveling at fourteen miles an hour ; taking off
one minutes and not two minutes from eighteen min-
utes ; in other words giving Mr. Gazzam the long end
of his figures, the problem then is. If he covered a
given course in ten or eleven minutes at fourteen
miles an hour, what speed is he making if he covers
that course in seventeen minutes in a dense fog. As

we figure it, the ' ' Reliance ' ' was traveling better than
eight miles an hour as is supported by Mr. Gazzam's
owTi evidence. If the time lie gave to the supposed
point of collision is considered, the "Reliance" was
making nearly her full speed ; and if the two vessels
were making substantially the same speed, what must
be said of the "Kitsap." The appellee respectfully
submits that the foregoing resume as to the "Kit-
sap's" speed and course proves by facts which are
not based upon mere wild guesses, but by the evidence
of the witnesses who saw her from the land, and of
the course she steered as determined by her position
relative to the Grand Trunk Dock ; of the witnesses
aboard of her and aboard of the "Reliance" that she
unquestionably w^ent to some point far south of the
Colman Dock ; and that this evidence is not even shak-
en by the statements of witnesses who stood upon her
deck and who one and all from Captain down never
once looked at the compass ; and therefore absolutely
could not know what course she did steer. If she
steered a course south of the Colman Dock; and es-
pecially if she steered a course which took her to a
point from which she was one minute or substantially
a minute in coming north to the point of collision she
had to steer a course which required her to make the
speed of ten to twelve miles an hour as testified by

the four witnesses who saw her pass the Colman
Dock.

AS TO THE SPEED AND COURSE OF THE
'^ INDIANAPOLIS."

The appellant in this case realized that the safest
course of procednre was to avoid as far as possible
any position which assumed mutual fault; as the
existence of mutual fault, would very likely lead to
the conclusion that if the "Kitsap" was in fault,
there w^as little need of looking further for the sole
cause of the collision. It has accordingly strenuously
bent its efforts toward upsetting the evidence of the
appellee with reference to the course and speed of the
"Indianapolis."

Realizing the small degree of weight given to
witnesses on the deck of vessels as to the speed of ap-
proaching vessels, as heretofore suggested, the appel-
lant has gotten up a highly technical attack
upon the only real evidence in the case, as
to the course of the "Indianapolis," and has at-
tempted to theoretically upset the cold hard facts and
in so doing has employed one H. A. Evans, as an al-
leged expert navigator, who introduced his evidence
with an eloquent eulogy upon his own attainments
and abilities, and who proceeds in the course of his

evidence to try to get away from the deadly fact that
the appellants' one witness as to the actual location
of the "Kitsap," Captain Gibbs said he found the
"Kitsap" off the Colman Dock. He assumed an
imaginary curved course taken by the "Indianapolis"
and "Kitsap" after the collision. He also attempted
to distort the evidence of Captain Penfield;
and also either unknowingly or with gross careless-
ness misstated the distance upon the chart and the ac-
tual distance between the bell buoy and the Colman
or Grand Trunk Dock, as shown by the government's
scale upon the chart itself.

First as to the evidence of Captain Penfield.

He testifies that the "Indianapolis" reached the
bell buoy off Duwamish Head, the entrance to Seattle
harbor, in substantially clear weather at 4 :33 on the
afternoon of the day of collision; that he ran the en-
gines full speed for five minutes through what was a
shiftuag, ioggy condition in which he could see over
a quarter of a mile ; that the course he steered was as
outUned upon the map which he produced, and which
hefore he testified had already had the course laid
upon it by himself, plainly and fairly drawn, from
the bell buoy direct for the Grand Trunk Dock. This
map is a government chart. Claimant's Exhibit 4.

Captain Penfield had had thirty years' experience at
sea; twenty-one years as master; and had been on
this run for four years. It would seem to be not only
hypercritical, but childish to attempt the palpable
subterfuge which Mr. Evans attempted, after looking
at this chart. He looked at the course laid on it ; he
considered that this m.aster has been steering a large
steamer over this course for four years, and then
tried to take advantage of a slip of the tongue made
after the chart was marked and the course laid on it,
and as the course appears, which error may have oc-
curred through the inadvertence of counsel or of the
witness, which appears at (E. p. 149) v^hen the cap-
tain was describing the course which he steers by the
ship's compass and which has a quarter point easterly
deviation upon the course in question ; and which he
said was, and which is, N.E. by E.^AE. on the compass
course. The inadvertent error discovered in reading
the evidence afterwards being in the last question
and answer upon the page in question where counsel
appears to have asked the question "m^agnetic," to
which the answer appears, ' ' Yes sir. ' ' We think this
court can readily understand how such an error
could occur without any attempt to misstate the facts ;
and we fail to see how anyone could assume that a
vitness could hope to gain anything by producing a

chart with the course marked on it ; and then inten-
ally dispute what he had marked. It might be plaus-
ibly argued if he had testified to a course and had
afterwards produced a chart with a different course
upon it; that the discrepancy was intentional. The
court will see by reading the last two or three para-
graphs on (R. p. 149) that the witness had marked a
course upon the chart and designated it as N.E. by E.
y2E. magnetic, before he answered the question, to
which all of the voluminous evidence of the witness
Evans is devoted.

After proceeding five minutes at full speed which
carried the vessel one and one-quarter nautical miles,
he put her at half speed, and during the interval of
the next minute he successively slowed down and
stopped her. (R. p. 143.) He had heard the whistle
of the '^ Kitsap" when he put her under slow speed.
The successive whistles of the "Kitsap" after this
first one, which was slightly off the port bow, at first
indicated that the vessel whistling was quite a dis-
tance away and was crossing his bow from port to
starboard and apparently clearing the "Indianapo-
lis." (R. p. 144.) And up to this time the indications
were that the vessel in question, while not having
the right of way, was proceeding on a course which
would clear the two of any danger of collision; and

undoubtedly if the "Kitsap" had proceeded upon this
course without swinging to the westward and north-
ward, the collision would never have occurred. The
next whistle of the "Kitsap" showed that she had
turned and was approaching the "Indianapolis," and
the engines were thereupon sent astern and within a
fraction of a minute half speed astern; and the rea-
soning in Captain Penfield's mind clearly appears
at the bottom of (E. p. 146.) He testifies that at the
end of the time specified the "Indianapolis" would
be practically at a stand still. (R. p. 147.) The
collision occurred in the neighborhood of 4 :40. This
time like that of all other witnesses, under the circum-
stances, is an estimate, as Captain Penfield says that
he did not look at the clock after 4 :39.

The court will observe from the evidence that
at this time the "Indianapolis" was due at the
dock, if she had maintained her ordinary and regular
speed across the bay.

He testified that the "Kitsap" was steering a
course which had brought her south of the course of
the "Indianapolis" and across the bows of the "In-
dianapolis" twice; and that the "Kitsap" was really
the colliding force ; in fact that she was coming pretty
fast ; and that he could see the wash upon her bow.

He gave the angle of collision as much sharper than
forty-five degrees, and as approximating a head on
collision. In passing we may connnent upon the criti-
cism of the appellant that we did not produce the
log showing the hells which the captain gave as the
' ' Indianapolis ' ' approached the ' ' Kitsap. " If it will
he any satisfaction to the lihelant, we will admit that
we did not take the time to log the hells under the im-
perative circumstances then commanding attention;
and we unagine that if we had logged them after-
wards, and had offered to use them as self-serving
declarations, that the appellant would have not heen
slow in calling attention to our attempt to manufac-
ture evidence ; a better answer still is that an uncon-
tradicted witness does not need corroboration. The
position of the approaching vessels, and the cut in the
how of the "Kitsap," all show that the point of im-
pact was something less than forty-five degrees; and
that the angle of penetration was about forty-five de-
grees ; and the evidence of all of the witnesses shows
that the sharp steel stem of the "Indianapolis" did
not enter the hull of the "Kitsap," a much lighter
and wooden vessel, until it had slid along upon, or
had heen scraped along upon the hull of the "Kit-
sap" some two feet from bow towards stern. (R. pp.
372 and 393.) The evidence of the mechanics who re-

paired the stem and plating of the "Indianapolis"
was to the effect that her stem was bent decidedly to
port; and that her plating was crushed to port as
would occur if the "Kitsap" had swung herself along
and against the stem of the "Indianapolis." (R. pp.
270, 271 and 276.)

To this effect also was the evidence of Captain
Frank Walker, a witness on behalf of the apellee,
who was shown to have been a man of wide experience
both as a practical sailor and navigator, and as a
shipbuilder and architect. (R. pp. 269, 279, 280, 282,
290 and 291.) We desire to call the attention of the
court in passing to the evidence of Captain Walker
at (R. pp. 292, 293 and 294) as illustrating the con-
tention of the appellee that if the moving force had
been the "Indianapolis" and if she had had any con-
siderable way as contended for by the appellant, a
vessel of her form and size would have gone clear
through the "Kitsap." Mr. Walker in his evidence
also calls attention to the fact that the photographs
which appellant has introduced into the record as
Exhibits "E," "F," "G" and "H" are very largely
pictures of damage resulting from the salvage oper-
ation; m fact Exhibit "E" shows to the court the
nature of those operations and particularly the big

log which was a part of the means of handling the
ship as she was raised and beached.

The evidence of the witnesses, Penfield and
Jacobs, was to the effect that the ^'Kitsap" at the
point of collision was moving qnite rapidly and that
she swung herself against the bow of the ' ' Indianap-
olis."

Following the collision the vessels separated, but
were brought together again with the bow of the "In-
dianapolis" held against the side of the "Kitsap"
mth the engines of the "Indianapolis" going ahead
dead slow (R. pp. 165 and 170) and not simply slow
as appellant states, and upon which error Mr. Evans
based his imaginary curve. They remained in this
position from five to ten minutes; this being, of
course, only a guess in any event. That they then
separated as the "Kitsap" was becoming water-
logged and sinking. The tide Avas at a strong ebb,
flowing north. Captain Penfield testified that with
the engines dead slow the "Indianapolis" would hard-
ly move the "Kitsap" under the conditions; and that
she could probably hardly stem the tide even if she
were headed against it, there being, however, no evi-
dence even of this suggestion of appellant, (R. pp. 170
and 171.) The first officer of the "Indianapolis, "whose

evidence begins at (R. p. 173), testified tliat the fog
was in streaks oft the bell buoy and that you could
see pretty well for some time; that he heard the
whistles of the "Kitsap" on the port bow (R. p. 174),
and then on the starboard bow; and that the "Kit-
sap" was coming fast (R. p. 175) ; that in his opin-
ion the "Indianapolis" was stopped when the collis-
ion occurred (R. p. 176), that he knew from the
trumpet on the Colman Dock that the "Indianapolis"
was on her course; and that the "Kitsap" from the
direction out of which she came in sight had un-
doubtedly been south of the course of the "Indianap-
olis. ' ' This witness had had thirty years ' experience
at sea; and had been three years on this course. He
also tetstitied upon cross-examination that he could
see the wash on the bow of the "Kitsap" as she was
coming ahead.

B. F. Jacobs, a witness for the appellee, was call-
ed to testify as to the whistles and as to the speed of
the "Kitsap" when she loomed out of the fog. He was
not called to log the course of the "Indianapolis" and
expressly stated that he was paying more attention
to the whistles than he was to the speed of the boats,
until they got in a close proximity to the docks (R.
p. 208, 210 and 212.) He testified that the "Kitsap"
vv^as making considerable speed when she appeared.

(R. p. 209.) He heard the whistles of the "Kitsap"
first on the port bow and then on the starboard bow.
Upon cross-examination, counsel attempted to coax
him into making numerous guesses as to time and
course of the ''Indianapolis," and against the demur
of the witness, succeeded in getting him to guess at
a number of matters which he expressly disclaimed
an accurate knowledge of; and now in his brief ap-
pellant attempts to discount the evidence of a credible
witness because in some respects his guesses did not
coincide with Captain Penfild's positive statements
as to course and speed. Counsel has not succeeded in
any way breaking down his evidence as to the ma-
terial questions upon which he was called to testify.
Captain Percival, a witness for the appellee, whose
evidence begins on (R. p. 245), and who had been
mate, pilot and master on the Sound for nine years,
testified that as the "Kitsap" appeared out of the fog,
she was swinging on her port helm hard a starboard ;
he had heard the whistles of the approaching "Kit-
sap" and had determined that the vessel was rapidly
approaching on the starboard bow of the "Indianap-
olis." (R. pp. 246 and 247.) He states further on (R.
p. 251) that the "Indianapolis" had, if anything,
very little headway; and that the "Kitsap" was the
moving vessel; and that the "Indianapolis" was un-

der control. This witness does not pretend to know
tlie exact location of the '' Indianapolis" when he
came on deck, because he did not see the land on either
side. We particularly call the court's attention to
the candor and fairness of this witness as shown on
(E. p. 255) and to the care with which he avoided
making an}^ absolute statement as to the '' Indianap-
olis" having a possible slight headw^a}^; and further
to the description he gave of the actual approach and
meeting of the vessels, wiiieh is in accordance with
the evidence of all the witnesses as to the action of the
stem of the "Indianapolis" in not cutting into the
hull of the "Kitsap" at once and directly as would
have been the case if she had been the principal mov-
ing object and the "Kitsap" stationary. We desire
to call particular attention to the statement of this
witness at (R. p. 256) where he was asked: "You
would not tell how the "Kitsap's" engines were work-
ing? answered, "No, sir, I am of the opinion, from
her movements, that she was backing." This was
cross-examination. Upon (R. p. 260) counsel for
appellee appreciating the adroit way in which the
questions had been put to the witness on (R. p. 256),
in order to clear any doubt upon the matter, asked
him whether or not he had referred to the engines of
"Kitsap" as backing or to the boat as backing; and

to which the witness answered that he thought the
engines were backing at the time we hit; and at the
top of page 211, expressly and clearly repudiates any
imputations as to the ''Kitsap'' herself backing by
saying expressly that she was not. We call the court's
particular attention to this because counsel for appel-
lant was not careful in reading the evidence and in
his brief inadvertently misstates the fact in this re-
spect. Upon (R. p. 260) this witness further testi-
fied that he had not seen the bell buoy and had not
paid particular attention to the exact location of the
"Indianapolis" when he went on deck. As in case of
the witness Jacobs, not having been called to locate
the course of the "Indianapolis," upon cross-examin-
ation, counsel also attempted to snarl him up in his
evidence and then to discredit him in his argument.

The appellant attempts to attack the evidence of
the master of the "Indianapolis" in two ways. First
by witnesses as to fog, and second by the theoretical
witness Evans. He introduced the evidence of Cap-
tain A. J. Wood, the master of the West Seattle
Ferry to show that the log of the ferry boat indicated
that there was a dense fog in Seattle Harbor on the
evening in question. Without raising the question of
the competence of such evidence. We are not disput-

ing this was very largely true on the Seattle shore.
The cross-examination of this witness at the top of
(R. p. 315) exactly supports the contention of the
appelle that it was a shifting fog, thin in one place
and thick in another ; and that it is thicker where the
ferry crosses, a half a mile south of the Duwamish
Head, than it is at the course of the "Indianapolis"
steers.

He also introduced the evidence of W. C. Gilbert,
who testified that he noticed no difference in the vi-
bration of the engines of the "Indianapolis" from the
time she left Tacoma harbor until he was knocked out
of his chair by the collision. We note the exact time
when he was knocked out of his chair, the inference
then being that the engines ran full speed ahead
until the actual collision. Will counsel for the ap-
pellant say for one moment that he believes this
evidence; would he suggest to this court that
a vessel like the "Indianapolis" going full speed
ahead into the "Kitsap," would only have cut seven
or eight feet into her light wooden hull ; does he want
the court to think his other witnesses testified to any
such state of facts. The statement is so preposter-
ous that no one would believe it, and yet if this wit-
ness did not know of the vibration stopping, until he
was knocked out of his chair ; and if, as a matter of

fact, the vil)rations did stop at one time before that ;
and he did not notice them, what does his evidence
amomit to. If they stoj^ped once and he did not no-
tice them, they might have stopped a dozen times.
He further testifies on (R. p. 115) that the fog only
lifted for about four or five minutes all the way over
from Tacoma to Seattle; and that it was so dense
that "you could not see your hand in front of ,you,
hardly. ' ' Does the libelant desire to contradict one of
its principal witnesses, Mr. Gazzam, who at (R. p.
338) testified as follows (he being on the " Reliance '^
which they say left approximately at the same time
vrith the "Kitsap") : "From 4:30 until we reached
the buoy, at the time we passed the buoy it lightened
a little and by the time we reached Alki Point it was
very clear." It seems to us that Mr. Gilbert's evi-
dence is disposed of.

The appellant produced the witness F. F. Wells,
structural engineer, who traveled over from Tacoma
on the "Indianapolis" and who was asked if he no-
ticed any difference in the amount of vibration from
the time she left Tacoma until the collision; and
who said that he did not notice any such vibration.
What we have said with reference to the witness
Gilbert applies with equal force to this witness, be-
cause we do not think that counsel for the appellant

will seriously argue that the "Indianapolis" struck
the "Kitsap" with her engines going full speed ahead.

We come now to the main reliance of the appel-
lant, to-wit: Witness Evans, whose whole energy is
taken up in disproving the actual observable facts
by a process of induction not based upon experience,
nor founded upon the actual facts in the case.

As we have heretofore pointed out, Mr. Evans
attacked the chart upon which the course of the "In-
dianapolis" had been plotted by the captain, and be-
cause of the inadvertent use of the word magnetic
on the bottom of page 149 in connection with the
difference between the deviated compass course of the
"Indianapolis" and the magnetic course on the chart,
assumed that he could run the course of the "Indian-
apolis" a quarter of a point further to the north-
ward and could thereby get the "Indianapolis" in
a position where the "Kitsap" would not have crossed
her course. He also, it seems to the appellee, pur-
posely attempted to construe certain marks placed
upon the chart by Captain Penfield as illustrat-
ive of places where he changed the speed of the "In-
dianapolis" into exact, though imaginary locations
in the water. He also for some reason overlooked
the fact that the chart with the extension of the

docks thereon of eight himclred feet, shows that the
distance from the bell bnoy to the end of the pres-
ent docks is not two nautical miles. Of course, Mr.
Evans may not have put the dividers upon the
chart, although a man of his supposed scientific at-
tainments should not allow counsel for one of the
parties to correct him along the lines of his own
business. He should, however, have done so espec-
ially when the suggestion was made by Captain Pen-
field at (R. p. 150) that the docks had been carried
out eight hundred feet. The whole purpose of Mr.
Evans in attempting to construe this evidence was
to contradict Captain Penfield and is based upon a
very simple problem of arithmetic, namely: Take
two nautical miles, the original course from bell buoy
to the shore on the Seattle side ; deduct eight hundred
feet for the fills and docks on the Seattle side; de-
duct one-fourth nautical mile for the supposed point
of collision off the dock; deduct one and one-quar-
ter nautical m.iles for the uncontradicted run of the
''Indianapolis." We have then much less than a
nautical half mile within which Mr. Evans makes all
his fine deductions; and if the "Indianapolis" at
the beginning of this fractional distance was run-
ning at full speed and gradually diminished until
just before the collision, her average speed in the

middle of this course would not be nine and one-half
miles as testified to by Mr. Evans, but would be less
than that; and her speed at tJie end of the course
and not her average speed at the middle of the course
is the speed in question in this case, so that all of
his fine house of cards falls to the ground because
of lack of exactness in the premises from which he
started.

We say all of this because we believe that the wit-
ness did not think that the marks in question were
intended to be measured marks, but w^ere simply il-
lustrative of the supposed position. These were no
more intended to be accurate and exact than the
diagram drawn upon the chart (appellee's Exhibit
Nine) illustrative of the supposed position of the
"Kitsap" and her course, was intended to be exact.
We make no pretense of knowing exactly how far
south the "Kitsap" went or of her exact degree of
curvature. It is not necessary for us to establish it
with exactness. Of course, the further south she went
the faster she had to go; and if she went south of
the Cohnan Dock at all, she had to go much faster
than five or six miles an hour. And this
is the sum and substance of Mr. Evan's
evidence with relation to the course of the
"Indianapolis." We next come to his very interest-

ing calculations to prove that the Kitsap was not
found where she was found, or to put it in his langu-
age to prove that while she was found as appellant's
witness Captain Gibbs said "off the Cohnan Dock,"
after having traveled as her master said about a
minute on a northwesterly course and with a favor-
able tide, this was not where the collision took place.
Mr. Evans then proceeds to change the facts in the
following particulars: He raises the speed of the
''Indianapolis" while she had her stem against the
side of the "Kitsap" from dead slow, i. e. her en-
gines, to ordinary slow; he raises the time from ten
minutes as testified to by Captain Penfield to twenty
minutes; he makes no comment upon the waterlog-
ged condition of the "Kitsap"; he makes no allow-
ance for the time during which the vessels were
separated; but in order to get the collision north of
the course of the "Indianapolis," he proceeds to
draw an imaginary but supposed course of curva-
ture; and the appellant seriously asks this court to
consider it, and to consider it for the purposes of
disputing the kno^^ni tangible evidence of where she
was found and the fact that four unimpeached and
supposedly fair witnesses actually saw her going
south of the Cohnan Dock, and in face of the conclu-
sion from the witnesses of appellant who testified

that she did not go south of the Cohiian Dock
because she had not done so heretofor^e, but who saw
no compass or land mark and in spite of the two
witnesses who testified to seeing the Grand Trunk
Dock, and the fire boat slip within one hundred or
two hundred feet after she had passed south six
hundred feet and had only gotten one or two hundred
feet away from the face of the Grand Trunk Dock,

Furthermore the whole attempt to disqualify
the evidence of Captain Penfield, which the appel-
lant had no means of contradicting directly, is based
upon an assumption which there is no evidence to
support. The point of collision for all we know
may not have been exactly a quarter of a knot off
the dock, but a few hundred feet either way would
make all the difference in the world in the speed of
the "Indianapolis," when this difference is to be
deducted out of a small fraction of a half knot of
the slow end of the course. We submit that it should
be borne in mind that it is not incumbent upon the
appellee to prove these exact locations in the water
and in the fog, and if the appellant is without the
means of accurately contradicting the evidence of
the appellee, that is no fault of ours, and it
certainly furnishes no basis for hypothetical dis-

putes and more especially for any distortion of the
actual facts, which he does seek to produce. Un-
doubtedly Captain Penfield's evidence of where he
was after he left Duwamish Head was based upon
the tune and the speed which the "Indianapolis"
made and no amount of argument can distort these
into a statement that he plumbed his location in the
water by anything else than his course and his speed.

The witness Evans was also given an opportun-
ity to illustrate his very expert knowledge in ex-
plaining how the sharp iron stem of the "Indian-
apolis" failed to penetrate the hull of a light wood-
en vessel like the "Kitsap" when the "Indianap-
olis" was rushing upon her at high speed, until af-
ter the stem had slipped along the hull of the
"Kitsap" two feet. This explanation is on a par
with the rest of his evidence and simply shows that
he is such a blind partisan as to attempt to justify
Siny desired assumption without rhyme or reason.
This fact is not open to dispute, nor is the fact that
the stem of the "Indianapolis" and the plating on
her port side were bent to p^ort, although she was
a strong iron ship. Counsel on page 33 of his brief
seems to have forgotten that four witnesses testi-
fied positively to the fact which he there supposes

that we produced no witnesses to sustain. No bet-
ter illustration of the futility of appellant's argu-
ment could possibly be hoped for than the case he
cites of Brooks against D. W. Lennox, 4 Fed., Case
Number 1952,

Coming now to the statement on page thirty-
eight of appellant's brief, that Captain Penfield tes-
tified that the deviation in the compass of the ''In-
dianapolis" vv^as one-quarter point easterly; and that
he steers his course by the compass N.E. by E. ^A
E. to make the course N.E. by E. V2 E. magnetic.
It is a matter of common knowledge that all com-
passes have a deviation, and Mr. Evans the expert
m^ade no attempt to deny it. But counsel asks on
page thirty-eight and thirty-nme of his brief why
Captain Penfield had not swung his compass in de-
termining this course.

The futility of this question should occur to
anyone in case of the master of a ship who for
four years has steered this course several tunes a
day. The very doing of this was the accomplish-
m.ent of the same purpose which would be involv-
in swinging the compass every time he steered the
course. It is true that he testified that he ran by
his compass in clear weather, but he did not say

that he steered his ship N.E. by E. % E. Compass
in clear weather; in fact would the court expect a
witness of any intelligence at all who was capahle
of being a master of the "Indianapolis" to steer
across the bay in clear weather with his eyes on the
compass and without looking ahead; and in order
to meet counsel's argument steer a course which
y^ould take him awa^^ south of his destination and
then finding that it landed him south of his desired
landing, to go on repeating it. To make such a sug-
gestion is to answer it. We must assume a reason-
able degree of ordinary common intelligence in any
ship master who can look straight ahead. If this
were a new course or the first time he tried it, it
might possibly argue that he would steer directly
out of the course which would take him to the des-
tination he wanted, but we hardly belieye counsel
will seriously expect the court to belieye that he
would do it habitually or that the eyidence in the
case could be construed into any such fantastical
proposition. We desire to call attention to the in-
consistency of the appellant's position in its brief
with reference to the distinction of sounds in a fog.
Counsel takes both sides of the question. If it suits
his purpose the witness is held to strict account-
ibility with reference to the sounds in a fog. If it

comes to a question of two of his witnesses contra-
dicting each other as to the sounds heard off the
docks, one saving southwest and the other north-
west, he explains them naturally by saying that
sounds are deceptive in a fog. We think that hu-
man experience justifies the latter statement and
we contend that as in the case of the witness Jacobs
when counsel proposes to hold him to accountability
as to a fme degree of distinction betw^een one point
and two points, that he carries criticism to a point
beyond reason. (R. p. 49).

RULE SIXTEEN

Counsel for appellant in this case in his en-
deavor to fix the whole responsibility for the col-
lision upon the "Indianapolis" has overlooked one
of the Rules governing steamships in a fog, and its
plain application to the facts in this case, and has,
failed to cite to the court the case of the "Beaver"
"Selja" recently decided by the United States Dis-
trict Court for the Northern District of California,
which, while, of course, not controlling upon this
court, is a valuable contribution to the list of de-
cisions establishing the principles which should be
applied. Its application is apparent from the read-
ing of the rule, which is found in Volume Two,

Federal Statutes Annotated, page 178, and wliicli
became a part of the law in its present form under
the act of June 7th, 1897, Thirty Statutes at Large,
96 to 99.

"A steam vessel hearing, apparently forward of
her beam, the fog signal of a vessel the position of
which is not ascertained, shall, so far as the cir-
cumstances of the case admit, stop her engines and
navigate with caution until the danger of collision
is over."

With reference to its application to the ''Kit-
sap," the master of the "Kitsap" testified in answer
to the question: "What, if anything, did you do
with the "Kitsap" after you heard the "Indian-
apolis' " fog whistles'?" "After we heard about
three whistles we stopped," (R. p. 30) the mate of
the Kitsap testified.

Q. "When did you first hear the "Indianap-
olis" whistle ? "

A. "I first heard her whistle after I came for-
word and asked the captain if we were on the course
yet."

Q. "Where did you hear these whistles, what
direction V^

A. "I heard them on the port bow."

Q. "How did they sound, were thev close to
you?"

A. "Well, the first one or two was pretty well
off, but they were getting closer right along."

Q. ''About how many points off your port
bowr'

A. "Two points."

And later as follows:

Q. "What was done after you heard the 'In-
dianapolis' whistles'?"

A. "I said to Captain Hanson, did you hear
the 'Indianapolis' blowing?"

Q. "Did he say anything 1"

A. "He says yes, I hear her, something like
that."

Q. "Go ahead and state Avhat is the next thing
that occurred there?"

A. "Well then, I heard another whistle. I says,
she is getting closer, you better stop her, captain."

Q. "What did he do, if anything?"
A. "He stopped her." (R. p. 70).

From the evidence, it appears certain that the
suggestion of the court in the "Beaver"-" Selja"
case was the practical suggestion in the mind of the
m.ate, and that it should have been acted upon, even
if there had been no previous negligence on the part
of the "Kitsap."

Appellant will doubtless come back with the
very natural argument that the same principle ap-
plied to the "Indianapolis." The difference between
the two is this, that the Master of the "Indianapolis",

although he did not stop his engines when he first
heard the whistle of the "Kitsap" according to his
evidence was not at that time within the meaning of
the rule as illustrated in the opinion of Judge Bean
in the " Beaver "-"Selj a" case, or within any fair
interpretation of the rule.

In other words the language of the rule "the
fog signal of the vessel, the position of ivliich is not
ascertained" does not apply if the Master of the
"Indianapolis" at that time not only ascertained her
position, but ascertained it correctly and ascertained
that it was proceeding at a distance and on a course,
which if maintained, would have passed her far south
of the "Indianapolis" when the "Indianapolis"
reached the crossing point. (E. p. 156) . It was only
when he heard the whistle of the" Kitsap ' ' on his star-
board bow and ascertained that she had altered her
course and was coming toward the "Indianapolis"
that the application of the rule in question applied
to the "Indianapolis"; and at that time she complied
mth the rule.

The appellee has no fault to find with the opin-
ions of the various court's citations, which are found
upon pages 57, 58, 59 and 60 of the appellant's brief,
as they are undoubtedly well established principles

of law and more particularly as they are of a general
nature and apply to tlie contentions of the appellee
as well as to the appellant.

We think the decision of this case rests almost
entirely upon the one or two questions of fact in-
volved in the disputed evidence ; and that the argu-
ments of appellant as for instance at the bottom of
page 109 and the top of page 110 of his brief amount
siniply to begging the question.

Most certainly if the court tinds as a fact that
the "Indianapolis" was "grossly at fault" the cita-
tion of authority by us would certainly fail to relieve
us of the penalty for our conduct. But it would not
relieve the appellant of his fault and his share in the
penalty. The statement following, how^ever, that
we will not seriously contend to the contrary is
equivalent to saying that we will not defend the case.
We might just as seriously assert our position which
is, that the Kitsap was grossly at fault, and say that
we do not think the appellant will contend to the
contrary.

We do, however, desire to call the court's atten-
tion to the fact that what is Imown as the crossing
rule, and upon the basis of which the appellant con-
tends that we violated the Rules of the Road, will
not apply in a fog.

The Grenadier vs. August Korff, 74 Fed. 974.
In that Mr. Justice Butler uses the following
language :

"What occurred before the signals were heard
respecting the speed and navigation of the respective
vessels is not deemed important. At this tune each
was enveloped in fog, so dense that the other could
not be seen, nor her location or course be ascertained
from the signals heard. The}^ might be near to-
gether or far apart ; their courses might be crossing,
or opposite, or otherwise. Nothing could be deter-
mined by sight, and sound was unreliable— likely to

be obstructed or deflected, and calculated to mislead.

* * * *

''The sixteenth clearly contemplates navigation
under ordinary circumstances, where the vessels can
see each other and thus ascertain their respective
courses. Its application is impossible where the ves-
sels are enveloped in dense fog, unable to see each
other or to ascertain their respective locations and
bearings. ' '

The reference here is, of course, to the rules as
numbered at that time.

Indeed, there would seem to be no escape from
this as a common sense, and therefore necessary con-
clusion.

If, however, counsel desires to seriousl}^ stand
upon this position, it seems as if the appellee is en-
titled to insist that the "Kitsap" only acquired the
advantage of the crossing rule, as against the "In-
dianapolis" by violating that rule herself and un-

doiibteclh^ the officers of the ''Indianapolis" who
heard her whistles on her port how had a right to
assume that although she was violating the rules of
the road as to am^ steamers bound to the Seattle
docks, still she was apparently far enough away and
proceeding upon a course which if she maintained,
it would avoid a collision.

What we have said with reference to the general
nature of citations applies also to the cases cited upon
pages 111 and 112 of appellant's brief. If the "In-
dianapolis" should have been under command, shall
not the same be said of the "Kitsap"? Does not the
citation for instance of the City of New York, 147
United States, 72, apply just as much to the "Kit-
sap" in running down the water front already in a
fog, as it does to the "Indianapolis" proceeding
toward the waterfront as first in clear weather and
afterwards in thickening weather, and as appellee
contends, slowing her speed as she approached the
denser condition.

To answer the argument on pages 113 and 115
of appellant's brief, which is simply a reiteration of
the argum.ent previously made by him, would of
course involve a reiteration by us with reference
thereto. The statement of all of this matter illus-

trates the fact that the appellant is so far coiiuiiitted
to his side of this case as to make it impossible that he
should f airlj^ consider the contention of the appellee ;
and the appellee is content in so far as the merit of
the case is concerned to rest the decision thereof upon
the facts which present themselves from physical
evidence and which do not depend upon the contra-
dictory opinions of witnesses upon the deck of other
ships.

Nothing which the appellant has said has tended
to move the ''Kitsap" one foot from the spot where
she was found. Nothing has tended to dispute the
evidence of the witnesses who saw her pass south of
the Cohnan Dock; nothing has tended to dispute the
forced admission of her master that he proceeded
approximately one minute on his course in a north-
westerly direction to the point of coUision from a
point somewhere south thereof; nothing of a tangi-
ble character has tended to show that any witness
who saw the "Kitsap" and observed her movements
knew what course she did steer from any of the ob-
servations or physical evidences upon which an ac-
curate human judgment could be based. The fact
that she steered one course in open weather on one
day does not in our opinion tend to prove with the
slightest weight what course she steered some other

dsij in a fog from a different point, and from a dif-
ferent angle of departure at an unknown degree of
lielm ; at a speed which was confessedly raised by the
engineer in obedience to a disputed order from the
wheel house.

And this is the sum and substance of the evidence
of all on board the Kitsap.

DAMAGES.

It is under this head that the appellee feels most
strongly inclined to resist the contention of the ap-
pellant. We subscribe fully to the statement ''That
restitution for the loss sustained and no more is the
rule for determining the amount of damages in case
of partial loss." The position which the appellant
takes in this case, however, is not the restitution for
loss sustained and no more. It is stipulated in this
record that the net earnings of the Kitsap were
$50.00 per day. It is a part of the record in this
case that the appellant was the owner of a spare boat.

We cheerfully concede the law as stated by this
court in the State of California, 54 Federal, 404,
with reference to the employment of a spare boat;
and here also the appellant is met by the facts.

He stipulates this loss was tlie loss of what the
Kitsap earned, fifty dollars per day; he attempts to
say that the charter value of his spare boat is twice
that sum, without, however, establishing that there
is any market charter value for such a boat or any
boat in the port of Seattle ; he overlooks the follow-
ing language at page 407 in the case cited, to-wit:
''And it is our opinion that the value of the use of
the injured vessel during the time of actual neces-
sary detention is the proper measure of the amount
to be allowed." The evidence in this case showed
that there was no market charter value of the spare
boat "Hyak". She had been under charter to the
appellee a year previous, but she had no charter at
the time in question; she had none offered or avail-
able during any of the time in question.

In this connection the Supreme Court of the
United States in in the case of The Conqueror, 166
United States, Page 110; 41 L. ed., at page 944, uses
the following language:

''That the loss of profits or of the use of a vessel
pending repairs, or other detention, arising from a
collision, or other maritime tort, and commonly
spoken of as demurrage, is a proper element of dam-
age, is too well settled both in England and America
to be open to question. It is equally well settled,
however, that demurrage will only be allowed when
profits have actually been, or may be reasonablv sup-

posed to have been, lost, and tlie amount of such
profits is proved with reasonable certainty. In one
of the earliest English cases upon this subject (The
Clarence, 3 W. Rob. Adm. 283), it was said by Dr.
Lushington that 'in order to entitle a party to be
indemnified for what is termicd in this court a conse-
quential loss, being for the detention of his vessel,
two things are absolutely necessary— actual loss, and
reasonable proof of the amount'. * * *"

And at page 945 further says:

"The dif&culty is in determining when the ves-
sel has lost profits 'and the amount thereof. The best
evidence of damage suffered by detention is the sum
for which vessels of the same size and class can be
chartered in the market. Obviously, however, this
criterion cannot be often applied, as it is only in
the larger ports that there can be said to be a market
price for the use of vessels, particularly if there be
any peculiarity in their construction which limits
their employment to a single purpose.

In the absence of such market value, the value
of her use to her owner in the business in which she
was engaged at the time of the collision is a proper
basis for estimating damages for detention, and the
books of the o\vner showing her earnings about the
time of her collision are competent evidence of her
probable earnings during the time of her detention.
The Mavflower, Brown, Adm. 376; The Transit, 4
Ben. 138; the Emilie, 4 Ben. 235."

The only fair basis of loss to the appellant in
this case is the loss which we caused him to suffer,
if we are the party in fault. He was making fifty
dollars per day with the Kitsap. During one hun-
dred and thirty-nine days he was deprived of this

profit. (We say he was deprived of it, when as a
matter of fact he was not deprived of anything be-
cause he used a boat which was idle and which was
without charter, and thereby avoided the loss). The
court, however, says, and we think justly, that if
he furnishes another vessel, which does the work
that we shall not be allowed to take advantage of his
forehandedness in this particular.

But what does the appellant desire to do? He
desires to make us pay him a profit of One Hundred
per cent, out of this accident. He sa,ys you have lost
my boat; I was making Fifty Dollars a day with
her; I have a boat which will take her place and
which will earn me Fifty Dollars a day, and I will
ask you to pay me twice as much money as I would
have made if this accident had not occurred.

The insistence by the appellant upon this un-
conscionable and, we think, outrageous demand has
prompted the appellee to stand strictly upon our
technical legal rights with reference to another item
of damage claimed by the appellant. It is nowhere
shown in this record that the appellant, or any per-
son, or corporation a party to this record, or even
named, or known has been put to any loss or damage
in the matter of salving the ''Kitsap" and we dispute

the right of the appellant to recover for the salvage
item upon the ground that there is no proof of in-
terest in the appellant or in anyone for raising and
salving her.

We have no desire to split hairs for the principle
of subrogation as between o^^Tier and underwriter,
but we respectfully maintain that those principles
are not invoked by the facts or the record in this case.
The fact that S. B. Gibbs, represented some under-
writers, (who they are; what their insurance was;
whether they were actual underwriters and for how
much, being entirely absent from the record) we
maintain cuts no figure, nor do we agree that if a
volunteer sees fit to raise a sunken ship and return
her to the owner and does it gratuitously that there-
by the owmer ipse facto can recover from one who
vfas responsible for sinking her. If he shows that
the salvor does it and claim salvage, undoubtedly a
different case is made.

The trouble with appellant's contention is that
he desires the court to supply by inference, evidence
which is missing, and we most respectfully submit
that in want of any evidence in support of actual
damage to the owner or of subrogation, that the re-,
covery allowed by the court below for the salvage
item was erroneous.

In conclusion we submit that the evidence in
this case overwhehningly shows that the "Kitsap"
was fully and clearly responsible for all of the loss
and damage which occurred and that the appellee is
entitled to recover its full damage and loss from the
appellant as prayed for in the court below and as
respectfully submitted to this court ; and that in any
event the appellee is entitled to be relieved upon the
case made from any contribution to the so-called
salvage expense.

Respectfully submitted,

IRA BRONSON,

Attorney for Appellee.

tional Citation: "The Beaver," the Portland
^Lsiatic S.S. Company vs. San Francisco & "^ort-
nd S.^.Co, ," 197 Fed. Page 866; being advance
5ets^^o^, 5 published October 3, 1912.

UNITED STATES OF AMERICA, 1

Plaintiff' in Error. 1

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant in Error. J

TRANSCRIPT OF RECORD

upon Writ of Error to the United States District Court

for the Western District of Washington,

Northern Division.

Lowman & Hanford Co., Seattle

EG E I VED

WdR : f !j*5!?^

No.

UNITED STATES OF AMERICA,

Plaintiff in FJrror.

vs.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant in Error.

TRANSCRIPT OF RECORD

upon Writ of Error to the United States District Court

for the Western District of Washington,

Northern Division.

Lowman & Hanford Co., Seattle

INDEX.

Page

Amended Answer . 20

Answer 10

Answer, Amended 20

Assignment of Errors 201

Bill of Exceptions 40

Certificate of Clerk U. S>. District Court to Eecord,

etc 208

Certificate to Bill of Exceptions 197

Certificate to Bill of Exceptions, Plaintiff's Proposed. 39

Certificate to Copies of Letters 124

Certificate to Original Exhibits 200

Checks, List of 139

Citation on Writ of Error 209

Commissioner's Certificate to Deposition of M. P.

McCoy 195

Complaint 2

Counsel, Names and Addresses of 1

Decision on Demurrer, Oral . . . . ; 16

Demurrer 15

DEPOSITIONS ON BEHALF OF PLAINTIFF :

McCOY, M. P 11

Cross-examination 55

Redirect Examination 82

Recross-examination 90

Redirect Examination 91

McCOY, M. P. (Taken Before Commissioner

Crow) 149

Cross-examination 160

Redirect Examination •__ 186

Recross-examination 192

Redirect Examination 193

11 UNITED STATES OF AMERICA VS.

Page
Exceptions, Bill of 40

EXHIBITS :

Exhibit "A" to Complaint 5

Plaintiff's Exliibit "H" 122

Plaintiff's Exhibit "J," Offered but not Ad-
mitted in Evidence 124

Plaintiff's Exhibit ''K" 124

Indictment for Violation of Section 5488, E. S 122

Judgment of Nonsuit 28

Letter, Dated October 15, 1907— Dennett to McCoy. . 124

Letter, Dated December 11, 1907— Dennett to McCoj^ 125

Letter, Dated December 13, 1907— Dennett to McCoy. 126

Letter, Dated December 19, 1907— Demiett to McCoy. 127

Letter, Dated December 26, 1907— Dennett to McCoy. 128

Letter, Dated January 7, 1908— Dennett to McCoy. . 128

Letter, Dated January 9, 1906 — Dennett to McCoy . . 129

Letter, Dated March 6, 1908— Dennett to McCoy. \ . . 130

Letter, Dated March 31, 190'8^Dennett to McCoy. . . 131

Letter, Dated April 14, 1908— Dennett to McCoy. . 132

Letter, Dated May 5, 1909— Dennett to McCoy 133

Letter, Dated June 18, 1908— Schwartz to McCoy. . . 134

Letter, Dated August 22, 1908— Dennett to McCoy ... 135

Letter, Dated November 25, 1908 — Dennett to McCoy. 136
Letter, Dated March 4, 1910— Todd to National Bank

of Commerce 137

List of Checks 139

Minutes of Trial 25

Motion for a Nonsuit, etc 113

Motion for Order Certifying Certain Exhibits as
Plaintiff's Exhibits Offered in Evidence and R'e-
jected by the Court, and Providing for Trans-
mission of Exhibits to Appellate Court 36

Names and Addresses of Counsel 1

Opinion on Demurrer 16

NATIONAL BANK OF COM^^IERCE. Ill

Page

Oral Decision on Demurrer 16

Order Allowing Writ of Error 205

Order Authorizing Clerk to Mark Plaintiff's Exhibit

"O" as Filed on March 12, 1912 35

Order Denying Motion for a New Trial 27

Order Directing Certification of Original Exhibits,

etc 38

Order Directing Forw^arding of Original Exhibits to

Appellate Court 199

Order Extending Time to July 18, 1912, to File Bill

of Exceptions 30

Order Extending Time to August 26, 1912, to File Bill

of Exceptions 32

'Order Extending Time to August 31, 1912, to File Bill

of Exceptions 33

Order Granting Motion for a Nonsuit and Reopening

Cause 25

Order Settling and Allow^ing Bill of Exceptions 197

Order Sustaining Demurrer 19

Petition for a New^ Trial 26

Petition for Writ of Error 2(M

Plaintiff's Proposed Certificate to Bill of Exceptions 39

Praecipe for Record 206

Proceedings Had March 13, 1912 113

Reply to xlmended xinswer 24

Stipulation Allowing Plaintiff Until July 18, 1912,

to Settle Bill of Exceptions 29

Stipulation Allowing Plaintiff Until August 26, 1912,

to File Bill of Exceptions 31

Stipulation Authorizing Clerk to File Plaintiff's

Exhibit "G" as of March 12, 1912 31

S'tipulation Concerning Certification, etc., of Original

Exhibits 37

Stipulation for Taking Deposition of M. P. McCoy. . 196

iV / UNITED STATES OF AMERICA VS.

Page
TESTIMONY ON BEHALF OF PLAINTIFF:

GOOD, W. G 93

Cross-examination 98

Redirect Examination 103

Recalled 118

Cross-examination 120

McKERCHER, C. W 120

Cross-examination 122

Trial 25

Writ of Error 211

In the District Court of the United States for the Western
District of Washington. Northern Division.

> No. 1933.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant.

NAMES AND ADDRESSES OF COUNSEL.

BEVERLY W. COINER, Esq.,

Room 310 Federal Building-, Seattle, Washington. Attorney

for Plaintiff in Error.

CHARLES F. RIDDELL, Esq.,

Room 310 Federal Building, Seattle, Washington. Attorney

for Plaintiff in Error.

J. A. KERR, Esq.,

1309 Hoge Building, Seattle, Washington. Attorney for

Defendant in Error.

S. H. KERR, Esq.,

1309 Hoge Building, Seattle, Washington. Attorney for

Defendant in Error.

E. S. McCORD, Esq.,

1309 Hoge Building, Seattle, Washington. Attorney for

Defendant in Error.

2 UNITED STATES OF AMERICA VS.

United States Circuit Court Western District of WasJiington.
Northern Division .

UNITED STATES OF AMERICA,

Plaintiff)

vs.

y 1933.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant.

COMPLAINT.

For a cause of action against the defendant the plaintiff
states :

That the defendant is, and at all times herein mentioned
was a corporation organized and existing under and by virtue
of the laws of the United States relating to the organization
of national banks, and engaged in such banking business as
a national bank at the city of Seattle, in said Western District
of Washington.

That during the years of 1907, 1908 and 1909, one M. P.
McCoy was an Examiner of Surveys and Special Disbursing
Agent for the Interior Department of the United States; that
during said times this plaintiff deposited, and caused to be
deposited with the defendant, large sums of money to the credit
of the said McCoy, to be by him used solely for the purpose of
making payment of the expenses which he might be authorized
to incur for the plaintiff as such Examiner and Special Dis-
bursing Agent.

IIL

That said deposits were so made with said defendant as a
Government depository, and in accordance v\ith the statutes of
the United States, and the regulations of its Treasury Depart-
ment relating to deposits and disbursements of public moneys.

NATIONAL BANK OF COMMERCE. 3

IV.

That said. McCoy did, at various times as hereinafter set
forth, illegally, fraudulently, and without any authority from
this plaintiff, draw checks on the defendant aggregating in
amount the sum of Fifteen Thousand One Hundred and
Twenty-nine and 81/100 (|15,129.81) Dollars, payable to the
order of fictitious payees, and thereafter at various places in
the iState of Washington and in the State of Montana, forge
the endorsements of the names of such fictitious payees, and
afterward procured from various banks in said states for his
own use the sums of money for which said cliecks were so
drawn.

That the defendant, when said checks were presented to it
from time to time, wrongfully and without authority from
this plaintiff, charged the respective amounts thereof against
the said deposits of this plaintiff.

VI.

That a list of said checks showing their respective dates,
amounts and names of payees, is hereto attached, marked
exhibit "A" and by this reference made a part of this
complaint.

VII.

That said forgeries were not discovered by this plaintiff
until on or about September 30, 1909, prior to which time of
discovery, this plaintiff", relying upon the representations of
the said defendant that said endorsements so made by said
McCoy were genuine, had by mistake credited the said defend-
ant with the said aggregate amount of said checks.

VIII.

That upon making such discovery, plaintiff notified the
defendant thereof, and thereafter, to-wit, on March 5, 1910,
demanded of and from the defendant the payment of said sum
of 115,129.81, which had been go credited to the defendant by
mistake on account of said forged endorsements.

4 UNITED STATES OF AMERICA VS.

IX.

That defendant refused and still refuses to make payment
of said amount, or any part thereof.

That there is now due and owing the plaintiff from the
defendant on said account, the sum of Fifteen Thousand One
Hundred and Twenty-nine and 81/100 (|15,129.81) Dollars,
together with interest thereon since March 5, 1910, at the rate
of 6% per annum, which the defendant neglects and refuses
to pay.

WHEREFORE, plaintiff demands judgment against the
defendant in the sum of Fifteen Thousand One Hundred and
Twenty-nine and 81/100 (|15,129.81) Dollars, together with
interest thereon at the rate of 6% per annum from March 5,
1910, until paid, and for its costs and disbursements herein.

ELMER E. TODD,
United States Attorney.

w. G. McLaren,

Assistant United States Attorney.

The United States of America,
Western District of Washington — ss.

W. G. McLaren being first duly sworn on oath deposes and
says : That he is an assistant United States Attorney for said
Western District of Washington, and is attorney for the
plaintiff herein and makes this verification for and in its be-
half; that he has read the foregoing complaint, knows the con-
tents thereof and believes the same to be true.

w. G. McLaren.

Subscribed and sworn to before me this 22d day of
December, 1910.

(Seal) W. D. COVINGTON,

Deputy Clerk U. S. Circuit Court, Western District of
Washington.

NATIONAL BANK OF COMMERCE.

Exhibit "A".

No.

Date,

Payee.

Amount.

Oct.

14,

1907

Albert Peterson

% 20.00

14,

Nels Anderson

20.00

14,

Wm. Jager

60.00

14,

H. Berggren

47.50

31,

F. L. Day

28.00

31,

G. Hoge

28.00

31,

Frank Engberg

96.00

31,

Chas. Lund

78.75

31,

J. D. King

62.00

31,

F. M. Clark

62.00

Nov.

30,

F. L. Day

52.50

30,

G. Hoge

52.50

•>■>

30,

Frank Engberg

180.00

30,

Chas. Lund

150.00

■>■>

30,

J. D. King

60.00

30,

F. M. CLark

60.00

Dec

. 31,

F. L. Day

54.25

31,

G. Hoge

54.25

I")

31,

Frank Engberg

186.00

■>•>

31,

Chas. Lung

155.00

•>•>

31,

F. M. Clark

62.00

■)•)

31,

J. D. King

62.00

Jan.

10,

1908

F. L. Day

17.50

•>■)

10,

G. Hoge

17.50

•>•)

10,

Frank Engberg

60.00

10,

Chas. Lung

50.00

•)i

13,

J. D. King

26.00

13,

F. M. Clark

26.00

May

John Jabelson

27.50

John S. Cole

36.00

31,

J. D. King

62.00

•)■>

31,

F. M. Clark

62.00

■>■)

31,

A. J. Whitney

54.25

UNITED STATES OF AMERICA VS.

No.

Date.

Payee.

Amount.

May

31,

1908

H. M. Benson

112.5.00

31,

C. A. Thrapp

150.00

June

10,

H. M. Benson

48.75

■>•)

10,

C. A. Thrapp

72.00

•)■)

23,

J. E. Scherer

78.00

•>•>

23,

H. M. Benson

63.75

30,

J. D. King

69.33

30,

F. M. Clark

60.00

30,

A. J. Whitney

54.25

30,

H. A. Moore

63.00

30,

D. H. Sullivan

12.25

30,

Geo. D. Cook

14.00

30,

F. V^\ McCulley

14.00

30,

S. F. Cady

12.25

30,

H. M. Benson

54.00

July

31,

J. D. King

100.00

31,

F. M. Clark

62.00

31,

Geo. D. Cook

62.00

31,

F. M. McCulley

62.00

31,

A. J. Whitney

62.00

31,

H. A. Moore

279.00

31,

D. H. Sullivan

54.25

31,

S. F. Cady

54.25

31,

H. M. Benson

248.00

Aug.

31,

J. D. King

100.00

31,

F. M. Clark

62.00

31,

Geo. D. Cook

62.00

31,

F. W. McCulley

62.00

31,

A. J. Whitney

62.00

31,

H. A. Moore

279.00

31,

D. H. Sullivan

54.25

31,

S. F. Cady

54.25

31,

H. M. Benson

248.00

22— A

Sept.

A. Fetters

7.85

22— B

30,

J. D. King

100.00

NATIONAL BANK OF C0M:MERCE.

Sept.

30,

1908

F. M. Clark

^60.00

30,

F. M. Clark

60.00

30,

Geo. D. Cook

60.00

30,

7 7

F. W. McCulley

60.00

30,

A. J. Whitney

60.00

30,

H. A. Moore

270.00

30,

D. H. Sullivan

52.50

30,

S. F. Cady

52.50

30,

H. M. Benson

240.00

Oct.

31,

J. D. King

100.00

31,

F. M. Clark

62.00

31,

H. A. Moore

279.00

31,

Geo. D. Cook

62.00

31,

F. W. McCulley

62.00

31,

A. J. Whitney

62.00

31,

H. M. Benson

248.00

31,

(Blank)

54.25

31,

S. F. Cady

54.25

Nov.

30,

J. D. King

100.00

30,

F. M. Clark

60.00

30,

Geo. D. Cook

60.00

30,

F. W. McCulley

60.00

30,

A. J. Whitney

60.00

30,

H. A. Moore

270.00

30,

D. H. Sullivan

52.50

30,

S. F. Cady

52.50

30,

H. M. Benson

240.00

Dec

. 31,

J. D. King

100.00

31,

F. M. Clark

62.00

31,

Geo. D. Cook

62.00

31,

F. W. McCulley

62.00

31,

A. J. Whitney

62.00

31,

D. H. Sullivan

54.25

31,

S. F. Cady

54.25

31,

T. E. Lynch

24.50

31,

Claude J. Ferret

24.50

UNITED STATES OF AMERICA VS.

No.

Date

Payee.

Amount.

Dec. 31,

1908

H. M. Benson

1276.00

" 31,

">•)

H. A. Moore

279.00

Jan. 5,

1909

J. D. King

12.90

" 5,

•>■>

F. M. Clark

8.00

■>■>

Geo. D. Cook

16.00

" 8,

F. W. McCulley

16.00

" 8,

■>■>

A. J. Whitney

16.00

" 8,

■>■)

D. H. Sullivan

14.00

" 8,

I")

S. F. Cady

14.00

" 8,

•)•)

H. M. Benson

48.00

" 8,

•)■>

H. A. Moore

72.00

Mar. 31,

1909

J. D. Kino

35.48

" 31,

F. M. Clark

22.00

" 31,

Geo. D. Cook

18.00

" 31,

'>i

F. W. McCulley

18.00

" 31,

•>■>

A. J. Whitney

18.00

" 31,

Joe Mikel

14.00

" 31,

E. M. Bassett

14.00

" 31,

Geo. K. Cooper

14.00

" 31,

Chas. Paine

14.00

" 31,

H. M. Benson

82.50

" 31,

A. C. Junkin

72.00

Apr. 30,

:>i

J. D. King

100.00

" 30,

■>•)

F. M. Clark

60.00

" 30,

■)■>

Geo. D. Cook

60.00

" 30,

F. W. McCulley

60.00

" 30,

A. J. Whitney

60.00

" 30,

Joe Mikel

52.50

" 30,

E. M. Bassett

52.50

" 30,

Geo. K. Cooper

52.50

" 30,

Chas. Paine

52.50

" 30,

A. C. Junkin

270.00

" 30,

H. M. Benson

300.00

May 31,

J. D. King

100.00

" 31,

F. M. Clark

62.00

NATIONAL BANK OF COMMERCE.

No.

Date.

Payee.

Amount.

May

31,

1909

Geo. D. Cook

§62.00

31,

F. W. McCuUey

62.00

31,

A. J. Whitney

62.00

31,

Joe Mikel

54.25

31,

E. M. Bassett

54.25

31,

Geo. K. CooiDer

54.25

31,

Chas. Paine

54.25

31,

A. C. Junkin

279.00

31,

H. M. Benson

310.00

June

30,

7 7

J. D. King

100.00

30,

F. M. Clark

60.00

30,

Geo. D. Cook

60.00

30,

F. W. McCulley

60.00

30,

A. J. Whitney

60.00

30,

Joe Mikel

52.50

30,

E. M. Bassett

52.50

30,

Geo. K. Cooper

52.50

30,

Chas. Paine

52.50

30,

H. M. Benson

300.00

30,

A. C. Junkin

270.00

July

31,

J. D. King

100.00

31,

F. M. Clark

62.00

31,

Geo. D. Cook

62.00

31,

F. W. McCulley

62.00

31,

A. J. Whitney

62.00

31,

Joe Mikel

54.25

31,

E. M. Bassett

54.25

31,

Geo. K. Cooper

54.25

31,

Chas. Paine

54.25

31,

A. C. Junkin

279.00

31,

H. M. Benson

310.00

Aug.

31,

J. D. King

100.00

31,

F. M. Clark

62.00

31,

Geo. D. Cook

62.00

31,

F. W. McCulley

62.00

UNITED STATES OF AMERICA VS.

No.

Date

Payee.

Amount.

17 Ai]

g- 31,

1909

A. J. Whitney

162.00

' 31,

•>•)

Joe Mikel

54.25

' 31,

E. M. Bassett

54.25

' 31,

Geo. K. Cooper

54.25

' 31,

•>•>

Chas. Paine

54.25

22 '

' 31,

^■>

A. C. Jiinkin

279.00

' 31,

•>•>

H. M. Benson

310

Indorsed: Complaint. Filed U. S. Circuit Court, West-
ern District of Washington. Dec. 22, 1910. Sam'l D. Bridges,
Clerk. W. D. Covington, Deputy.

Uiiited States Circuit Court, Western District of Washington,
Northern^ Division.

UNITED STATES OF AMERICA

Plaintiff,
vs.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant

y No. 1933.

ANSWER.

Comes novr the defendant in the above-entitled action and
answering the complaint of the plaintiff, for cause of answer
says :

Defendant admits the allegations contained in paragraph
one of the complaint.

II.

Answering the second paragraph of the complaint, this
defendant admits that during the years 1907, 1908 and 1909

NATIONAL BANK OF COMMEUCE. 11

one p. M. McCoy was an Examiner of Surveys and Special
Disbursing Agent for the Interior Department of the United
States; that during said period plaintiff deposited with the
defendant large sums of mone^^ to the credit of said P. M.
McCoy, and denies each and every other allegation in said
paragraph contained and each and every part thereof.

III.

Answering the third paragraph of the complaint this de-
fendant admits that said deposits were made with this defend-
ant, but denies each and every other allegation in said para-
graph contained, and each and every part thereof.

IV.

Answering the fourth paragraph of the complaint this
defendant says that it has neither knowledge nor information
sufficient to enable it to form a belief as to the truth or falsity
of the matters and things therein alleged, and therefore denies
the same and each and every part thereof.

Answering the fifth paragraph of the complaint this de-
fendant admits that it paid certain checks drawn by the said
McCoy against said deposits of the plaintiff and charged the
respective amounts thereof against the deposits of the plaintiff,
but denies each and every other allegation in said paragraph
contained, and each and every part thereof.

VI.

Answering the sixth paragraph of the complaint this de-
fendant says that it has neither knowledge nor information
sufficient to enable it to form a belief as to the truth or falsity
of the matters and things therein alleged, and therefore denies
the same and each and every part thereof,

VII.

Ansv.-ering the seventh paragraph of the complaint this
defendant savs that it has neither knowledge nor information

12 UNITED STATES OF AMERICA VS.

sufficient to enable it to form a belief as to the truth or
falsity of the matters and things therein alleged, and therefore
denies the same and each and eveiy part thereof.

VIII.

Answering the eighth paragraph of the complaint this de-
fendant admits that on the 5th of March, 1910, the plaintiff
demanded of and from the defendant payment of Fifteen
Thousand One Hundred Twenty-nine and 81/100 Dollars
(115,129.81), and denies each and every other allegation in
said paragraph contained and each and every part thereof.

IX.

Answering the ninth paragraph of the complaint this de-
fendant admits that it refused and still refuses to make the
payment of said amount or any part thereof.

Answering the tenth paragraph of the complaint this de-
fendant denies the same and each and every part thereof, and
denies that there is now due and owing to the plaintife from
the defendant on said account the sum of |15,129.81, or any
other sum or sums whatsoever.

For a further and first affirmative defense to said complaint
this defendant alleges:

That during the years 1907, 1908 and 1909 the plaintiff
deposited with the defendant various and considerable sums
of money to the credit of one M. P. McCoy, as Examiner
of Surveys and Special Disbursing Agent for the Interior
Department of the United States, with instructions to pay
checks drawn against said deposits by the said M. P. McCoy
as such Examiner and Special Disbursing Agent; that at the
end of each month the account so created in favor of the said
McCoy was regularly balanced by the defendant and the
vouchers returned to the plaintiff and a statement of account
was rendered both to the said McCoy and to said plaintiff

NATIONAL BANK OF COMMERCE. 13

monthly during the entire time that the plaintiff carried said
account in favor of the said McCoy with this defendant.
That the plaintiff did not, within sixty days after the return
to the plaintiff of the checks drawn by the said McCoy against
said account, notify the defendant that the checks so paid
were forgeries. That by reason of such failure to so notify
the defendant of said forgeries within sixty days after the
return of the paid checks, the plaintiff is barred and estopped
from maintaining this action.

For a further and second affirmative defense to plaintiff's
complaint this defendant alleges:

That the deposits so made by the plaintiff' with this
defendant in favor of the said M. P. McCoy, as such Examiner
and Special Disbursing Agent, were made in the usual and
customary manner, as deposits are generally, ordinarily and
customarily made by any individual depositor and that the
relation of debtor and creditor was created between the
plaintiff and the defendant by reason of such deposits, and that
it became the duty of the defendant to pay checks drawn by the
said McCoy against such deposits, and that all checks drawn
by the said McCoy against said deposits were paid from time
to time as the same were presented for payment, and that it
was not the duty of the defendant to inquire as to the name
of the payee of such checks, and that all checks paid by the
defendant as referred to in the complaint were duly and reg-
ularly signed with the genuine signature of the said M. P.
McCoy, as such Examiner and Special Disbursing Agent, and
that monthly statements were rendered to the plaintiff and
to the said McCoy, showing the amount of each check drawn
by the said McCoy against said deposits and the aggregate of
such checks, and that such monthly statements were duly and
regularly rendered in conformity with the usual custom of
bankers, and that no complaint of any kind was made to the
defendant by the plaintiff as to the improper payment of any

14 UNITED STATES OF AMERICA VS.

checks by reason of forgeries or otherwise, until the 5th day
of March, 1910. That it was the duty of the plaintiff upon
the return of the vouchers of the said McCoy and upon the
rendition of statements of his account, to have examined the
said account and to have promptly notified the defendant of
the alleged forgeries, if any there were, and that by reason
of plaintiff's failure to so notify the defendant of such forgeries
within a reasonable time after the said checks were paid, the
said plaintiff is barred and estopped of any right it may have
had to maintain this action for the recovery of the money
prayed for in the complaint.

WHEREFORE defendant prays that it may be dismissed
hence with its costs and disbursements in this action expended.

KERR & McCORD,
Attorneys for Defendant.
State of Washington,
County of King — ss.

Ralph S. Stacey, being first duly sworn, upon oath deposes
and says that he is Second Vice President of the National Bank
of Commerce of Seattle, the defendant in the above entitled
action; that he has read the within and foregoing answer,
knows the contents thereof, and that the same is true, as he
verily believes.

RALPH S. STACEY.

Subscribed and sworn to before me this, the 11th day of
February, A. D., 1911.

(Seal) J. >^, lYEY,

Notary Public in and for the State of Washington, Residing
at Seattle.

Copy of within answer received and due service of same
acknowledged this 11th day of February, 1911.

ELMER E. TODD,

w. G. McLaren,

Attorneys for Plaintiff.

NATIONAL BANK OF COMMERCE. lo

Indorsed: Answer. Filed U. S. Circuit Court, Western

District of Wasliington, Feb. 11, 1911. Sam'l D. Bridges,
Clerlv. W. D. Covington, Deputy.

United mates CircuU Court Western District of Washington.
Northern' D ivisio 7%.

UNITED STATES OF AMERICA,

Plaintiffs

vs.

NATIONAL BANK OF COMMERCE,

a Corporation,

Defendant.

y No. 1933.

DEMURRER.

Comes now the above named plaintiff and demurs to the
first affirmative defense of the defendant herein, for the reason
and upon the grounds that said affirmative defense does not
state facts sufficient to constitute a defense to said action.

II.

And ])laintiff demurs to defendant's second affirmative
defense for the reason and upon the grounds that said defense
does not state facts sufficient to constitute any defense to said,
action. ELMER E. TODD,

United States Attorney.

w. a McLaren.

Assistant United States Attorney.

Received a copy of the within demurrer this 23d day of Feb.,
1911. Kerr & McCord. Attorneys for Defendant.

Indorsed: Demurrer. Filed U. S. Circuit Court, Western
District of Washington, Feb. 23, 1911. Sam'l D. Bridges,
Clerk. W. D. Covington, Deputy.

16 UNITED STATES OF AMERICA VS.

United States Circuit Court Western District of Washington.
Sorthern Dirision.

UNITED STATES OF AMERICA ^

XATIOXAL BANK OF COMMERCE. J ^'''^ ^^^^'^ "'' '^'^^•

ORAL DECISION ON DEMURRER TO AFFIRMATIVE

DEFENSES.

The United States prosecutes this action to recoYer a sum
of money, being the aggregate amount of numerous checks
issued by a disbursing agent against a deposit account subject
to his checks in the defendant bankj which is an authorized
depository of government money. A series of frauds was prac-
ticed by issuing checks payable to the order of fictitious payees,
these were endorsed by the disbursing agent using the fictitious
names, other banks then received and cashed them and passed
them on to the defendant, and by that method the disbursing
agent obtained and misappropriated the money.

The defendant pleads as a defense that during the period
of time in which the checks were issued and paid, it reaularlv
rendered monthly statements of account to the government and
with each statement returned the checks which had been paid
during the preceeding month, and that by failing to report the
bad checks with business promptness, the action is barred by
laches. Thf- answer contains two separate affirmative defenses
liut they are alike, except that, the first one alleges that the
government failed to report the bad checks within a period of
sixty days. The demurrer is aimed at both of these defenses.
If these checks came to the defendant bank through other
Ijanks the defendant became obligated, by business rules and
bank rules, to promptly report any oronnd for rejecting the
checks, or for reclaiming the amounts paid thereon. I doubt
very much whether it would have recourse at this time against
the banks from whom the checks were received, even if the

NATIONAL BANK OP COMMERCE. '^^

o-oyernment slioiild prevail in the action. The r'^nt to reclaim
rs probably barred by the lapse of time. There may be good
oTound for holdino- that the statutes that have been cited are
not applicable or controlling- but without any statute the rule
of honest, fair dealing between contracting parties applicable
to this case, is that bankers must bear losses resulting from
paying bad checks. When a check is presented for payment,
the banker has a right to know, to be assured, before paying,
that the person demanding payment is the identical person
entitled to receiye the money. If a check is written payable
to a person, or supposed person, or to his order, the bank is
not obligated to pay that check until the holder identifies him-
self as the payee, or endorsee and offers satisfactory proof of
the genuineness of eyery endorsement thereon. That is a
natural right incidental to a banker^s liability for making a
payment to a person haying no right to demand it. Now, trac-
ing that same rule a little further, where the bank has been
deceived and has paid a check which ought not to have been
paid, early information of the error is necessary to preserve
the right of recourse against whomsoever may be primarily
respon^sible for the error and the depositor is the one best quali-
fied to discover errors, so that there is a presumption that he
will, upon inspection of checks that have been paid, discover
a bad check if there is one, and he is obligated to be vigilant
and prompt to report errors. Therefore, where there is a
running account between a depositor and a bank, and monthly
statements are made to the depositor, with a surrender of his
checks that the bank has paid, according to the rule of honesty
and fair dealing, the depositor becomes bound to look at the
returns and report any error promptly. The rule between
individuals having mutual running accounts is that, an account
stated becomes an account proved, if the party to whom the
statement is rendered fails to show errors or mistakes in it
within a reasonable time. There is a good reason for this,
which this case demonstrates, for if the plaintiff had acted with
promptness in checking up the returns made by the defendant

18 UNITED STATES OP AMERICA VS.

as pleaded in its answer, the fraudulent practice would have
been discovered and stopped and all parties could have been
protected. The failure of the government to examine these
returns and report errors in time, was a cause of the successful
practice, or continuance of those frauds, and was necessarily
detrimental to the defendant. That failure on the part of the
government counterbalances any neglect to discharge its ob-
ligation on the part of the defendant bank. There has been
a loss suffered by reason of mutual neglect by plaintiff and
defendant. Now, who should bear that loss? I think that
the common law rule, that where there is negligence and con-
tributor}' negligence the law will not concern itself with any
controversy as to who should bear the loss, but leaves the loss
to rest where it falls. In this case that rule leaves the loss
resting upon the plaintiff. The Court sustains the demurrer
to the first affirmative defense and overrules it as to the second.

C. H. HANFORD
United States District Judge.

Indorsed: Oral Decision on Demurred to Affirmative De-
fenses. Filed U. S. Circuit Court, Western District of Wash-
ington, Sept. 21, 1911. Sam'l D. Bridges, Clerk. B. O.
Wright, Deputy.

NATIONAL BANK OF COMMERCE.

In the Circuit Court of the United States for the Western
District of Washington. Northern Division.

UNITED STATES OF AMERICA,

Plaintiffs

vs.

"> No. 1933.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant.

ORDER.

The above entitled cause having come on for hearing in
open court on the 18th day of September, 1911, on the demurrer
of the plaintiff to each of the two separate affirmative defenses
of the defendant herein, plaintiff appearing by Elmer E. Todd,
United States Attorney, and W. G. McLaren, Assistant United
States Attorney, and defendant appearing by Kerr and
McCord, its attorneys, and the Court having heard the argu-
ment of counsel thereon, and being in all things fully advised ;

It is hereby ordered that the demurrer of the plaintiff to
the first affirmative defense of the defendant, be, and the same
is hereby sustained;

To which action of the Court the defendant then and there
excepted, which exception is hereby allowed.

It is further ordered that the demurrer of the plaintiff to
the second affirmative defense of the defendant be, and the
same is hereby overruled ;

To which action of the Court the plaintiff then and there
excepted, which exception is hereby allowed.

Done in open court this 21st day of September, 1911.

C. H. HANFORD, Judge.

Indorsed: Order. Filed U. S. Circuit Court Western
District of Washington, Sept. 21, 1911. Sam'l D. Bridges,
Clerk. B. O. Wright, Deputy.

20 UNITED STATES OF AMERICA VS.

Ill the District Court of the United States for the Western
District of Washington, Northern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

I No. 1933.
NATIONAL BANK OF COMMERCE

OF SEATTLE, a Corporation,

Defendant.

AMENDED ANSWER.

Comes now the defendant in the above entitled action and
filing its amended answer to the complaint of the plaintiff, for
cause of answer, saj^s :

Defendant admits the allegations contained in paragraph
one of the complaint.

Answering the second paragraph of the complaint, this de-
fendant admits that during the 3'ears 1907, 1908 and 1909, one
P. M. McCoy was an Examiner of Surveys and Special Dis-
bursing Agent for the Interior Department of the United
States; that during said period plaintiff deposited with the
defendant large sums of money to the credit of said P. M.
McCoy, and denies each and every other allegation in said
paragraph contained and each and every part thereof.

IIL

Answering the third paragraph of the complaint, this de-
fendant admits that said deposits were made with this de-
fendant, but denies each and every other allegation in said
paragraph contained and each and every part thereof.

IV.

Answering the fourth paragraph of the complaint, this de-
fendant says that it has neither knowledge nor information

NATIONAL BANK OF COMMERCE. 21

sufficient to enable it to form a belief as to the truth or falsity
of the matters and things therein alleged, and therefore denies
the same and each and every part thereof.

V.
Answering the fifth paragraph of the complaint this de-
fendant admits that it paid certain checks drawn by the said
McCoy against said deposits of the plaintiff and charged the
respective amounts thereof against the deposits of the plaintiff,
but denies each and every other allegation in said paragraph
contained, and each and every part thereof.

VI.
Answering the sixth paragraph of the complaint, this de-
fendant says it has neither knowledge nor information suf-
ficient to enable it to form a belief as to the truth or falsity of
the matters and things therein alleged, and therefore denies
the same and each and every part thereof.

VII.
Answering the seventh paragraph of the complaint, this
defendant says that it has neither knowledge nor information
sufficient to enable it to form a belief as to the truth or falsity
of the matters and things therein alleged, and therefore denies
the same and each and every part thereof.

VIII.
Answering the eighth paragraph of the complaint, this de-
fendant admits that on the 5th of March, 1910, the plaintiff
demanded of and from the defendant payment of Fifteen
Thousand One Hundred Twenty-nine and 81/100 Dollars
(115,129.81), and denies each and every other allegation in
said paragraph contained and each and every part thereof.

IX.

Answering the ninth paragraph of the complaint, this de-
fendant admits that it refused and still refuses to make the
payment of said amount or any part thereof.

22 UNITED STATES OF AMERICA VS.

Answering the tenth paragraph of the comphiint, this de-
fendant denies the same and each and eyerj part thereof, and
denies that there is now due and owing to the plaintiff from
the defendant the sum of if;i5,129.81, or any other sum or sums
whatsoever.

And for a further and first affirmative defense to the com-
plaint, this defendant alleges:

1. That the deposits so made by the plaintiff' with the de-
fendant in favor of P. M. McCoy as such Examiner of Surveys
and Special Disbursing Agent, were made in the usual and
customary manner, as deposits are usually, ordinarily and
customarily made by any individual depositor and that the
relation of debtor and creditor was created between the plain-
tiff and the defendant by reason of such deposits, and that it
became the duty of the defendant to pay the checks drawn by
the said McCoy against said deposits, and that all checks drawn
by the said McCoy against said deposits were paid from time
to time as the same were presented for payment, and that it
was not the duty of the defendant to inquire as to the name
of the pa^^ee of such checks and that all checks paid by the de-
fendant as referred to in the complaint were duly and reg-
ularly signed with the genuine signature of the said McCoy,
as Special Examiner and Disbursing Agent, and that monthly
statements were rendered to the plaintiff and to the said McCoy
showing the amount of each check drawn by the said McCoy
against said deposits and the aggregate of such checks, and that
such monthly statements were duly and regularly rendered in
conformity with the usual custom of bankers, and that no com-
plaint of any kind was made to the defendant by the plaintiff
as to the improper payment of any checks by reason of forgeries,
fictitious payees, or otherwise, until the 5th day of March,
1910. That it was the duty of plaintiff upon the return of
the vouchers of said McCoy and upon the rendition of state-
ments of his account, to have examined said account and to

NATIONAL BANK OF COM^IERCB.

have promptly notified the defendant of the alleged forgeries
or fraud, if any there were. That the failure on the part of
the plaintiff to*^ promptly notify the defendant of the alleged
forgeries or fraud, if any there were, resulted in damage and
injurv to the defendant in a sum in excess of the amount sued
for by the plaintiff in this action, and that the defendant was
damaged by such negligence on the part of the plaintiff in
failing to notify the defendant of the alleged forgeries
promptly, in that the defendant would have been able— if the
forgeries had promptly been made known to the defendant—
to have prevented any of the forgeries except the first one, or
the ones that occurred during the first month of the period
during which said forgeries are alleged to have been committed;
and that by reason of the failure of the plaintiff to so promptly
notify the"^ defendant of the fraud of the said McCoy, the de-
fendant is precluded from asserting any claim that it may
have had against the various banks which forwarded the
checks in question to the defendant for payment, and that by
reason of plaintiff's failure to so notify the defendant of such
fraud on the part of said McCoy within a reasonable time after
said checks were paid and a statement of the account of the
said McCoy, together with the vouchers, was sent by the de-
fendant to the plaintiff, the said plaintiff is barred and estop-
ped of any right it may have had, if any, to maintain this action
for the recovery of the money prayed for in the complaint.

For a further and second affirmative defense to the com-
plaint, this defendant alleges :

1. That the money sued for in this action, whether paid to
fictitious payees or otherwise, was expended and used by the
said McCov in payment of claims against the United States
created bv^said McCoy under authority of the United States
and in pursuance of the laws of the United States, and in pay-
ment of claims that the said McCoy, as Special Examiner of
Surveys, was authorized to make and pay on behalf of the
United States.

24 UNITED STATES OF AMERICA VS.

WHEREFORE defendant prays that it may be dismissed
hence with its costs and disbursements in this action expended.

KERR & McCORD.
Attorneys for Defendant.

Indorsed: Amended Answer. Filed in the U. S. District
Court, Western District of Washington. Mar. 12, 1912. A.
W. Engle, Clerk. By S. Deputy.

United States District Court, Western District of Washiugton,
Northern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

}> No l^S'^-C
NATIONAL BANK OF COMMERCE, a

corporation.

Defendant.

REPLY TO AMENDED ANSW^ER

Comes now the plaintiff and for its reply to the first affirm-
ative defense in defendant's amended answer herein, denies
each and every allegation therein contained.

Replying to the second affirmative defense, plaintiff denies
that the money sued for in this action, or any part thereof,
was expended and used in payment of claims against the
United States or at all.

ELMER E. TODD,
United States Attorney.

w. G. McLaren,

Assistant United States Attornev.

NATIONAL BANK OF COMMERCE. 25

Keceived a copy of the within Reply this 12th day of March,

1912.

KERR & McCORD,

Attorneys for Defendant.

Indorsed : Reply to Amended Answer. Filed U. S. District
Court, Western District of Washington, Mar. 13, 1912. A. W.
Engle, Clerk, By S. Deputy.

In the District Court of the United States for the Western
District of Washington, Northern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

NATIONAL BANK OF COMMERCE,

Defendant.

TRIAL

y No. 1933

And now the hour of ten o'clock A. M. haivng arrived, the
plaintife being represented by W. G. McLaren, and the defend-
ant represented by E. S. McCord, the jury being called all an-
swer to their names, all being present in their box, this cause
proceeds by the plaintiff resting its cause and the defendant
moves for a non-suit, and the Court having duly considered
the motion and being sufficiently advised grants said motion.

And now at this time upon motion of the plaintiff the
case is reopened and the cause proceeds by the introduction of
documentary evidence and examination of witness on behalf of
the plaintiff until the close thereof.

Whereupon the jury is discharged from further considera-
tion of the cause.

Journal 2— Pages 319-320.

26 UNITED STATES OF AMERICA VS.

In the District Court of the United States for the Western
District of Washington^ Xortherii Division.

UNITED STATES OF AMEKICA,

Plainti^\

^^- Y No. 1933

NATIONAL BANK OF COMMERCE,

Defendant.

PETITION FOR NEW TRIAL

Comes now the plaintiff herein by Elmer E. Todd, United
States Attorney, and by W. G. McLaren, Assistant United
States Attorney, and moves the Court to grant a new trial in
the above entitled cause, upon the following grounds, to-wit :

That error in law occurred at the trial of said cause, then
and there duly excepted to by plaintiff herein, which error
consisted in granting a motion of non-suit against the x)laintiff
at the close of plaintiff's case.

This petition is based upon the records and filed herein.

ELMER E. TODD,

United States Attorney.

w. G. McLaren,

Assistant United States Attorney.

Received a copy of the within Petition this 20th day of
March, 1912.

KERR & McCORD,
Attorney for Defendant.

Indorsed: Petition for new Trial. Filed in the U. S. Dis-
trict Court, Western Dist. of Washington, Mar. 22, 1912, A.
W. Engle, Clerk. By S. Deputy.

NATIONAL BANK OF COM FIERCE. 27

United States District Court, Western District of Washington,
Northern Division.

UNITED STATES OF AMERICA,

Plaintiif,
vs.

Y X0.1933-C

NATIONAL BANK OF COMMERCE,

Defendant.

ORDER DENYING MOTION FOR NEW TRIAL.

This matter having heretofore come on regularly for hear-
ing on the 17th day of June, 1912, before C. H. Hanford,
Judge of the above entitled court, upon plaintiff's motion for
a new trial, plaintiff appearing by W. G. McLaren, United
States Attorney, and the defendant appearing by Kerr &
McCord, its attorneys, and the court having heard the argu-
ments of counsel therein, and being in all things fully advised ;

IT IS HEREBY ORDERED, That said motion of plaintiff
for a new trial herein, be, and the same is hereby denied;

To which ruling of the court the plaintiff then and there
fully excepted, and the exception is hereby allowed.

C. H. HANFORD, Judge.

Order Denying Motion for New Trial. Filed in the U. S.
District Court, Western Dist. of Washington, June 27, 1912.
A. W. Engle, Clerk. By S. Deputy.

28 UNITED STATES OF AMERICA VS.

United States District Court, Western District of Washington,
Northern Division.

UNITED STATES OF AMEKICA,

Plaintiff),

vs.

y No. 1933-C

NATIONAL BANK OF COMMERCE,

Defendant.

JUDGMENT OF NON-SUIT.

This matter having heretofore come on regularly for trial
before the above entitled court and a jur}-, plaintiff appearing
by Elmer E. Todd, United States Attorney, and by W. G.
McLaren, Assistant United States Attorney, and the defend-
ant appearing by Kerr & McCord, its attorneys, and the court
having heard the evidence submitted in behalf of the plain-
tiff, thereupon the defendant made a motion for the dismissal
of said cause, on account of the insufficiency of the plaintiff's
evidence, and the court having heard the arguments of counsel
thereon, thereupon granted said motion, and thereafter on the
17th day of June, 1912, a motion for a new trial by the plain-
tiff coming on regularly for hearing and having been denied
by the court, now therefore,

IT IS HEREBY ORDERED, ADJUDGED AND DE-
CREED, That plaintiff take nothing by its said action, and
that the said action be and the same is hereby dismissed ;

To which judgment of the court the plaintiff excepts, and
the exception is hereby allowed.

C. H. HANFORD, Judge.

Indorsed: Judgment of Non Suit. Filed in the U. S. Dis-
trict Court, Western Dist. of Washington, June 27, 1912. A.
W. Engle, Clerk. By S. Deputy.

NATIONAL BANK OF COMMERCE.

United States District Court, Western District of Washington,
JSlortliern Division,

UNITED STATES OF AMERICA,

Plaint iff,

vs.

No. 1933-C

NATIONAL BANK OF COMMERCE,

Defendant.

STIPULATION.

It is hereby stipulated by and between the parties hereto,
by their respective attorneys of record herein, that the plaintife
may have thirty days from the 18th day of June, 1912, in which
to prepare and settle its bill of exceptions herein.

W. G. McLAREN,

Attorney for plaintiff.
KERR & McCORD,
Attorneys for defendant.

Indorsed : Stipulation. Filed in the U. S. District Court,
Western Dist. of Washington. June 27, 1912. A. W. Engle,
Clerk. By S. Deputy.

30 UNITED STATES OF AMERICA VS.

United States District Cornet, Western District of Washington,
Northern Division.

UNITED STATES OF AMERICA, "^

Plaintiff,

^^' y No. 1933-C

NATIONAL BANK OF COMMERCE,

Defenckuit.

ORDER EXTENDING TIME FOR FILING BILL OF
EXCEPTIONS.

Upon motion of the United States Attorney, and pursuant
to the written stipulation of the parties hereto now on file
herein, providing for the extension of time to the plaintiff for
signing, allowing and filing of bill of exce[)tions herein, the
court having considered the same and cause being shown
therefor ;

IT IS HEREBY ORDERED, That the time for the prep-
aration, signing, allowance and filing of bill of exceptions of
the above named plaintiff in the above entitled cause, is hereby
extended for a period of thirty daja from and after June 18th,
1912.

Dated this 27th day of June, 1912.

C. H. HANFORD, Judge.

Indorsed : Order Extending Time for Filing of Exceptions.
Filed in the U. S. District Court, Western Dist. of Washington,
June 27, 1912. A. W. Engle, Clerk. By S. Deputy.

NATIONAL BANK OF COMMERCE. 31

United States District Court, Western District of Washington,
Northern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

1^ No. 1933-C

THE NATIONAL BANK OF COM-
MERCE,

Defendant.

STIPULATION.

It is hereby stipulated by and between the parties hereto
by their respective attorneys of record herein, that the plain-
tiff may have up to and including August 26, 1912, in which
to prepare, file and serve its bill of exceptions herein.

Dated this 15th day of July, 1912.

W. G. McLAREN,

Attorney for Plaintiff,
KERR & McCORD,
Attorneys for Defendant.

Indorsed: Stipulation. Filed in the U. S. District Court,
Western Dist. of Washington, July IT, 1912. A. W. Engle,
Clerk. By S. Deputy.

UNITED STATES OF AMERICA VS.

United States District Court, Western District of Washington,
Northern Di vision.

UNITED STATES OF AMERICA, ^

Plainti/f,

vs.

y No. 1933-C

THE NATIONAL BANK OF COM-
MERCE.

Defendant.

ORDER.

On motion of the United States Attorney, and pursuant to
a Y^^ritten stipulation of the parties hereto now on file herein,
providing for the extension of time of the plaintiff for pre-
paring, filing and serving its bill of exceptions herein, the court
having considered the same and good cause being shown there-
for;

IT IS HEREBY ORDERED AND CONSIDERED, That
the time within which the plaintiff may prepare, file and serve
its bill of exceptions herein, be, and it is hereby extended and en-
larged to and including the 26th day of August, 1912.

Dated this 17th day of July, 1912.

C. H. HANFORD, Judge.

Indorsed : Order. Filed in the U. S. District Court, West-
ern Dist. of Washington, July 17, 1912. A. W. Engle, Clerk.
By S. Deputy.

NATIONAL BANK OF COMMERCE. 33

United States District Court, Westerti District of Washington,
Northern Division.

UNITED STATES OF AMEKICA,

Plaintiff,

vs.

1^ No. 1933-C

THE NATIONAL BANK OF COM-
MERCE, a corporation,

Defendant

ORDER.

Upon motion of the United States Attorney, and the above
named defendant, by its attorneys, Kerr & McCord, consenting
thereto, good cause therefor being shown;

IT IS HEREBY ORDERED AND CONSIDERED, That
the time within which pUiintife may prepare, file and have cer-
tified its bill of exceptions herein be and it is hereby extended
and enlarged to and including the 31st day of August, 1912.

Done in open court this 24th day of August, 1912.

EDWARD E. CUSHMAN, Judge.

Indorsed : Order. Filed in the U. S. Dist. Court, Western
Dist. of Washington. Aug. 24, 1912. A. W. Engie, Clerk. By
S. Deputy.

34 UNITED STATES OF AMERICA VS.

United States District Court, Western District of Washington,
Northern Division.

UNITED STATES OF AMERICA, ^

Plaintiff,

vs.

y No. 1933-C

NATIONAL BANK OF COMMERCE,

Defendant.

STIPULATION.

It is hereby stipulated by and between the above named
parties, through their respective undersigned attorneys of re-
cord herein, that an order may be entered authorizing and di-
recting the Clerk of the above entitled court to stamp and file
plaintiff's exhibit "G" herein, as of date March 12, 1912, when
the same was offered in evidence in the trial of the above en-
titled cause, in order that a correction may be made of the
inadvertent omission to properly stamp, mark and file said
exhibit at the time the same was so offered and received in
evidence.

Dated this 29th day of July, 1912.

w. G. McLaren,

United States Attorney.
KERR & McCORD,
Attorneys for defendant.

Indorsed: Stipulation. Filed in the V. S. District Court,
Western Dist. of Washington, July 30, 1912. A. W. Engle,
Clerk. By S. Deputy.

NATIONAL BANK OF COMMERCE. 35

United States District Court, Western District of Washington,
Northern Division.

UNITED STATES OF AMERICA, "|

Plaintiff, j

vs. y No. 1933-C

NATIONAL BANK OF COMMERCE, |

Defendant, j

ORDER AUTHORIZING CLERK TO MAKE A NUNC

PRO TUNC FILE, STAMP AND MARKING OF

PLAINTIFF'S EXHIBIT ^'G."

It appearing to the court that iu the trial of the above en-
titled cause in the above entitled court on March 12, 1912,
plaintiff's exhibit "G" was offered in evidence by the plaintiff
and admitted in evidence by the trial court, and that by an
inadvertent oversight said exhibit was not stamped, marked
or filed by the Clerk of the court so as to show that the same
was so received and admitted in evidence; now, therefore, on
motion of the United States Attorney and upon the Stipulation
of the parties now on file herein ;

IT IS HEREBY ORDERED, That the Clerk of the above
named court be, and he is hereby authorized, directed and or-
dered to mark said exhibit "G" as having been admitted and
filed in evidence in the above entitled cause on said March 12,
1912, in order that the record of said exhibit being admitted
in evidence may be correct.

Done in open Court this 30th day of July, 1912.

EDWARD E. CUSHMAN, Judge.

Indorsed : Order. Filed in the U. S. District Court, West-
ern Dist. of Washington, July 30, 1912. A. W. Engle, Clerk.
By S. Deputy.

36 UNITED STATES OF AMERICA VS.

United States District Court, Western District of Washington,
Northern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

No. 1933.

NATIONAL BANK OF COMMERCE,
a corporation,

Defendant.

MOTION.

Comes now the United States by W. G. McLaren, LTnited
States Attorney, and moves the court to enter an order herein
certifying the accompanying exhibits as plaintiff's exhibits
"B," "C," "D," "E" and ''F," ofPered in evidence on the trial
of this cause, and rejected by the court; and certifjdng and
authorizing and directing the Clerk of this court to transmit
to the Circuit Court of Appeals for the Ninth Circuit, said re-
jected exhibits, and plaintiff's exhibits "A" and "G." ns a part
of the bill of exceptions herein, when the same shall be filed.

This motion is based upon the records and files herein, and
upon the accompanying stipulation.

w. G. McLaren,

United States Attorney.

Indorsed : Motion. Filed in the \j. S. District Court, West-
ern Dist. of Washington. Aug. 22, 1912. A. W. Engle, Clerk.
By S. Deputy.

NATIONAL BANK OF COMMERCE.

United States District Court, Western District of Washington,
Northern Di vision.

UNITED STATES OF AMERICA, "|

Plaintiff, I

vs. I

y No. 1933
NATIONAL BANK OF COMMERCE,

a corporation,

Defendant.

STIPULATION.

It is hereby stipulated aud agreed by and between the above
named parties, through their respective undersigned attorneys
of record herein, that an order may be entered herein certifying
as a part of tlie bill of exceptions herein and directing the
Clerk of the above named court to transmit to the Circuit Court
of Appeals for the Ninth Circuit, plaintiff's original exhibits
"xV and ''G" herein, and certifying as a part of the bill of
exceptions herein and directing the Clerk to transmit to said
Circuit Court of Appeals for the Ninth Circuit, plaintife's ex-
hibits "B," "C," ''D," "E," and "F," as exhibits offered in
evidence by plaintife in the trial of said cause, and rejected by
the court.

This stipulation is executed for the purpose of the hearing of
this cause in said Circuit Court of Appeals on a writ of error,
and for the reason that the alleged forgery of papers in said
exhibit "A" is at issue in this cause, and all of said exhibits are
claimed by the plaintiff to be in the handwriting of one McCoy
and are difficult of reproduction.

Dated at Seattle, Washington, this 1st day of Aug., 1912.

w. G. McLaren,

U. S. Atty.
KERR & McCORD,
Attorneys for Defendant.

38 UNITED STATES OF AMERICA VS.

Indorsed: Stipulation. Filed in the U. S. District Court,
Western Dist. of Washington. Aug. 22, 1912. A. W. Engle,
Clerk. By S. Deputy.

United States District Court, Western Wistrict of Wasliington.
Northern Di visio n.

UNITED STATES OF AMERICA, ^

Plaintiff,
vs.

No. 1933.

NATIONAL BANK OF COMMERCE,

a Corporation,

Defendant,

ORDER.

Upon the motion of the United States Attorney, it appear-
ing to the court that plaintiff's exhibits "A" and "G" received
in evidence on the trial of this cause, and plaintiff's exhibits
"B", "C", "D", "E" and "F", offered in evidence and rejected
by the court, are claimed by the plaintiff to be in the hand-
writing of one McCoy, and that the alleged forgery by said
McCo}'- of the papers comprising plaintiff's exhibit "A'' is in
issue herein and that an inspection of said exhibits and re-
jected exhibits will be aidful to the Appellate Court in the
determination of this cause on writ of error, and the parties
consenting thereto ;

IT IS HEREBY ORDERED, that the papers marked
plaintiff's exhibits "B", "C", "D", ''E" and "P", be placed in
the custody of the Clerk of this court for safe keeping, and
designated as the exhibits offered in evidence by plaintiff on
the trial of this cause and rejected by this court ;

IT IS FURTHER ORDERED, That upon the settlement
and certification of the bill of exceptions herein, said rejected
exhibits "B", "C", "D", "E" and "F", and the exhibits marked

NATIONAL BANK OF COMMERCE.

plaintiff's exhibits "A" and ''G", be certified as a part of said
bill of exceptions, and that all the originals be transmitted
to the Circuit Court of Appeals with the printed record herein
as part of said bill of exceptions.

Done in open court this 22d day of August, 1912.

EDWAED E. CUSHMAN, Judge.

Indorsed: Order. Filed in the U. S. District Court,
Western District of Washington, Aug. 22, 1912. A. W. Engle,
Clerk. By S. Deputy.

United States District Court, Western District of Washington,
Northern: Division.

No. 1933— C.

UNITED STATES OF AMERICA ^

Plaintiff, j

vs. y

NATIONAL BANK OF COMMERCE, |

Defendant. J

PLAINTIFF'S PROPOSED CERTIFICATE TO BILL OF

EXCEPTIONS.

I, Edward E. Cushman, United States District Judge for
the Western District of Washington, holding court in the
Northern Division of said district, in which the above entitled
cause was tried, do hereby certify that the above entitled cause
was tried before Cornelius H. Hanford, then United States
District Judge for said Western District of Washington, who
has since duly and regularly resigned his said position as such
judge, which said resignation has heretofore been duly and
regularly accepted, and do hereby certify and authenticate the
foUowing matters and the deposition and exhibits herein re-
ferred to or hereto attached as all the evidence, exhibits and

40 UNITED STATES OF AMERICA VS.

other material facts, matters and proceedings in said cause,
not already a part of the record therein, and now constitute
the same a bill of exceptions herein.

EDWARD E. CUSHMAN,
United States District Judge.

In the United States District Court for the Western District
of Washington., Korthern Division.

UNITED STATES OF AMERICA, "i

Flainti/f,
vs.

y No. 1933— C.

NATIONAL BANK OF COMMERCE
a Corporation,

Defendant. ^

BE IT REMEMBERED that heretofore and on to-wit,
March 12, 1912, the above entitled cause came reguiarlv on for
trial in the above court, and before the Honorable C. H. Han-
ford, District Judge, sitting v^ith a jury.

The plaintiff appearing by W. G. McLaren, Esq., Assistant
United States Attorney;

The defendant appearing by E. S. McCord, Esq., of Messrs.
Kerr & McCord, its attorneys and counsel ;

A jury having been duly empaneled and sworn to try the
cause, and counsel for plaintiff having made his opening state-
ment to the jury, counsel for defendant reserving his opening
statement, thereupon the following proceedings were had and
done, to-wit:

MR. McLaren : win the Clerk hand me the deposition
and the checks and the exhibits?

NATIONAL BANK OF COMMERCE. 41

MK. McCOKD : Do you want me to help you read it, Mr.
McLaren, the questions?

MR. McLAREN : Yes, if you will, Mr. McCord. You will
find my copy on the desk there, if you want to.

Gentlemen, this is the testimony I am reading to you. We
took the deposition of this Mr. McCoy, whom I have just told
you about, over in Spokane a few weeks ago, before the United
States Commissioner at Spokane. I am reading to you now
the answers which he gave in response to the questions which
I put to him at that time, and there is also in this deposition the
examination that Mr. McCord made of him in behalf of the
defendant bank. If you will read the questions, Mr. Cord, I
will be obliged to you.

Counsel thereupon read the deposition of M. P. McCoy, a
witness on behalf of the plaintiff, taken before Denton M. Crow,
a United States Commissioner in and for the Eastern District
of Washington, at his office in Spokane, Washington, beginning
on February 19, 1912, which reading and the proceedings had
in connection therewith were as follows:

M. P. McCOY, a witness on behalf of the plaintiiT, being
first duly sworn, on oath deposes and says as follows :

DIRECT EXAMINATION

BY MR. McLAREX :

Q Your name is M. P. McCoy, is it?

A Yes sir.

Q You were formerly in the government service?

A Yes sir, as examiner of surveys for the General Land
Office.

Q What was your official title?

A Examiner of Surveys and Special Purchasing Agent.

MR. McLaren : "Disbursing Agent" that should be, Mr.
McCord.

42 UNITED STATES OF AMERICA VS.

Q AMiere were your headquarters?

A Seattle.

Q During what period of time did you occupy that
position?

A From about 1900 until about two years ago.

Q About November, 1909?

A Yes sir.

Q You held that position continuously during that time?

A Yes sir.

Q What other important position, if an^^, did you hold
prior to that period?

A I was a member of the Geological Survey for the In-
terior Department.

Q For about how long?

A For about ten years before that.

Q What were your duties as examiner of surveys and
special disbursing agent, what was the nature of your work?

A The public lands are surveyed by contract, by deputy
surveyors, and by business was to inspect their surveys in the
field after their finishing their work — checking it up, in other
words, to see if it was correct.

Q About how wide a territory did your duties cover?

A Well, I was in the States of Washington, Oregon, Idaho
and Montana.

Q And you say that your headquarters were at Seattle?

A Yes sir.

Q What was it necessary for you to do, Mr. McCoy, in
order to go around examining these public — these surveys of
public lands, what did you have to do?

A To inspect the surveys in the field, which necessitated
transportation and assistants and subsistance for the
assistants.

Q You were authorized by the Government to employ men
for that purpose?

NATIONAL BANK OF C0M:MERCE. 43

A And to incur all these expenses.

Q Were some of these surveys made in the State of
Washington?
A Yes sir,

Q Where, for instance?
A Well throughout the state.

Q You got your instructions from Washington, D. C?
A Yes sir.

Q Were these instructions given to you for each particular
survey, or were they in the nature of general instructions which
you were to follow out?

A There were general instructions and sometimes special
instructions.

Q Under the general instructions, did you have your own
option as to the order in which you took up the examination
of the different surveys?
A Yes sir.

Q What arrangement was made relative to the payment
of the bills that you might incur under your authority for the
performance of your duties?

BY MR. McCORD: Q Were these instructions in
writing ?

A Yes sir.
BY MR. MCLAREN :

Q What became of these instructions, Mr. McCoy?
A I burned them something like two years ago, when this
trouble began, I burned all my field notes and note books and
all things of that kind. I had a trunk full and I burned them.
Q Can you give us, briefly, the arrangements you had with
the Government, whereby this money was to be paid for labor,
or for services, or material, which you might incur?

MR. McCORD: I object as that is not the best evidence
and no proper foundation has been laid for the introduction
of secondary evidence.

MR. McCORD : I object to that.

THE COURT: I overrule the objection.

44 UNITED STATES OF AMERICA VS.

Q I will ask you this question, Mr. McCoy — From where
did you get your instructions regarding the payment of this
money?

A From the Commissioner of the general land of&ce.

Q Were they oral, or in writing?

A ^'S'ritten.

Q These written instructions, you still have them?

A No sir.

Q What became of them?

A I burned them.

Q I will ask you what 3^our instructions were, as to how
you were to pay these men?

MR. McCORD : I object, as it is not the best evidence ;
asking for the contents of a written instrument; there is not
shown any reason why the originals cannot be produced. The
best evidence would be the files in the Land Office at Wash-
ington, or a copy of them.

MR. McCORD : I make that objection. Your Honor.

MR. McLaren : The testimony shows the originals were
burned, Your Honor. I think any secondary evidence is
competent.

( Discussion. )

THE COURT : The next best evidence to the originals
would be an examined or approved copy. I will sustain this
objection.

MR. McLaren : AIIow us an exception.

THE COURT: Exception allowed.

Q How were 3^ou to pay them?

A I was to pay them as disbursing agent.

Q I mean by cheek or by cash?

A Well laterly I paid everything — I guess during this
period in dispute, I guess, I paid everything by check.

Q On what banks were your checks drawn?

A The National Bank of Commerce of Seattle.

Q You had an account there?

MR. McCORD : I move to strike out the testimonv as not

NATIONAL BANK OF COM^IERCE. 45

responsive to the question, he asked how he was instructed to
do and he answered how he did it.

MR. McCORD : I v^aive that, he answered yes.

A Yes sir, I had an account with the National Bank of
Commerce as Special Disbursing Agent.

Q You drew on that account, in accordance with your
instructions, for the payment of bills and expenses?

MR. McCORD: I object to that question, Y^our Honor,
for the same reason. That is a conclusion as to whether he
drew it in accordance with his instructions. The instructions
would be the best evidence.

THE COURT : I overrule the objection. He may testify

as to what he did.

MR. McCORD: I ask an exception.
THE COURT : Exception allowed.

Q You drew on that account, in accordance with your
instructions, for the payment of bills and expenses?
A Yes sir.

Q Nov/, Mr. McCoy, I will ask you to examine this bundle
of checks, which I hand you, and state whether, or not, they
were issued by you while you were in the employ of the Gov-
ernment.

A Yes sir.

Q On each check that is your signature, M. P. McCoy,
Examiner of Surveys and S. P. A.?
A Y^es sir.

Q Sp A? Special Disbursing Agent?
A Yes sir.

Q. Mr. McCoy, what is the meaning of the marginal nota-
tion, Voucher Number 6, or Voucher number so and so, on the
check, what does that refer to?

A In making my quarterly statement, or rendering my
quarterly account to the General Land Office, I submitted a
voucher for each check, up until along about in September, or
October, or November, 1909.

Q 1908 you mean, Mr. McCoy?

46 UNITED STATES OF AMERICA VS.

A Yes sir, it was in 1908, from that time on I used a new
form of pay-roll that covered the pay-roll expenses, but I still
used the voucher plan for sustenance and transportation.

Q And supplies?

A Yes sir.

Q Examine these checks again, Mr. McCoy, are the names
of the payees real or fititious persons in each instance?

A Fictitious.

Q That is, there were no such persons?

A No sir,

Q Does this apply to each of them to whom these checks
were made out?
A Yes sir.

Q Examine the endorsements on the back, Mr. McCoy,
and state whose individual endorsement is on the back of
these checks, if you know.

A I do.

Q Are these endorsements, one or more on each check, are
these the endorsements of real persons or fictitious persons?

A Fictitious persons.

Q Did the Government receive any services, or supplies or
anything of value in exchange for these checks?

MR. McCORD : I object to that as incompetent, irrelevant
and immaterial.

THE COURT: Objection overruled.

MR. McCORD: Exception.

THE COURT: Exception allowed.

A No sir.

Q Did you receive the money on these checks, in each
instance?

A Yes sir.

Q For the amount of the check?

A Yes sir.

Q So far as the appearance of these checks go, Mr. McCoy,
are they made out in the same form and in the same manner

NATIONAL BANK OF COMMERCE. i»

as Tou made out checks to real persons for real serTices
rendered?

A They are,

Q That ivS, they are apparently regular on their face, are

they not?

A Yes sir.

Q I believe I asked you if you made the endorsements on

the back yourself?

A Yes sir.

Q Take, for instance, the first check, October 14, 1907,
number one, payable to Albert Peterson, you had no sucli per-
son as Albert Peterson rendering services at that time?

A Xo sir.

Q You endorsed it Albert Peterson and J. D. King?

A Yes sir.

Q And that way you received the money yourself?

A Y"es sir.

Q That statement of fact is true of each check?

A Yes sir.

MR. McLaren : I offer in evidence this bundle of checks,

as plaintiff's Exhibit ''A'\

MR. McCORD: I object as incompetent, irrelevant and
immaterial and the instruments not properly identified.

THE COURT : The objection is overruled.

MR. McCORD: Exception, Your Honor.

THE COURT: Exception allov>-ed.

Checks referred to admitted in evidence and marked
Plaintiff's Exhibit ''A'\

MR. MCLAREN : At this time, Mr. McCord, I would like
to submit the checks to the jurors, so tiiat they may follow the
testimony.

(Addressing the jury and exhibiting checks to the jury.)

These are the checks that have just been testified to. They
are not quite in the order they were. If you will kindly keep
them as they are. Each month is separated into a smaller
package by itself. The voucher number that was referred to

48 UNITED STATES OF AMERICA VS.

in Mr. McCoy's testimony you will find in the upper left liand
corner. Just pass those among jou, will you, please?

(The jury examined checks embraced in Plaintiff's Ex-
hibit "A"'.)

Q You got these blank checks from the National Bank
of Commerce when you opened up your account?

A Yes sir.

Q Did the cancelled checks come back to you, Mr. McCoy,
or were they sent by the bank to the Department?

A They did not come back to me.

Q Xow while you were — During the period that is covered
by these checks, you were doing some actual work for the Gov-
ernment, were you not, in the performance of your duties?

A Yes sir.

Q How often were you required to send in reports to the
department in Washington?

A Weekly.

Q Did 3^ou send in weekly reports during this period
covered by these checks in evidence?

A Yes sir.

Q I believe you testified that these checks, so far as ap-
pearance goes, are the same as real checks issued to real persons
by you?

A Yes sir.

Q Xow you spoke, a moment ago, Mr. McCoy, about a
voucher system that was prevelant between you and the De-
partment. I will ask you now to take this bundle of vouchers
and examine them, these for the — marked for the month of
October, 1907. I will take voucher number six as an example.
This purports to be signed by Albert Peterson, for services
rendered of the amount of twenty dollars, from October 5th,
1907, to October 14, 1907, and down below that is the signature
of M. P. McCoy approving the same — Is that a genuine or
fraudulent voucher?

A Fraudulent.

Q You signed the name Albert Peterson?

NATIONAL BANK OF COMMERCE. 49

Q Then you approved it, with your own signature, as
actually rendered to the Government for services?
A Yes sir.

Q Now ^^'ill you go through the list of vouchers I hand
you, for the month of October, 1907, and state whether or not
they correspond with the voucher number noted on the margin
of the checks for that same month— You have checked over
these vouchers for the various months covered by the fraud-
ulent checks shown as Exhibit "A"?
A Yes sir.

Q These vouchers are the vouchers referred to on the
margin of the checks?
A Yes sir, they are.

Q How often did you send these vouchers to the De-
partment?

A Quarterh\
A Every three months?
A Yes sir.

Q I now hand you another document, certificate for the
month of October, 1907, is that your signature, M. P. McCoy,
Examiner of Surveys?
A Y'^es sir.

Q That refers, does it not, to the individual vouchers that
you have just examined for that month?
A Yes sir.

Q That is a statement that you sent in as a part, or a
summary of the quarterly account?
A Yes sir.

MR. McLAKEN: I now offer in evidence, as plaintiff's
Exhibit "B" the vouchers just testified to by the witness as
having been sent in by him, quarterly, to the Department at
Washington, D. C, for the following months; October, 1907;
MR. McCORD : And so on. I object to each of them as
incompetent, irrelevant and immaterial and for the further
reason that they show, in the light of the witness's testimony
that they are all fraudulent.

50 UNITED STATES OF AMERICA VS.

MR. McLaren : if the Court please, the very basis of
this suit is that the checks were fraudulent and as a circum-
stance tending to rebut any evidence of negligence on the part
of the Department at Washington, we purpose to show by those
vouchers that they were apparently regular, that they complied
in every respect with the departmental regulations, practice
and custom, that there was nothing so far as the conduct of
M. P. McCoy's accounts, contents of his accounts and reports
and vouchers, to indicate to the Department of the United
States that the fraud was being perpetrated at the time.

MR. McCORD : I don't think it makes an3' difference.
Your Honor. I think it is wholly immaterial, irrelevant and
incompetent whether he sent any vouchers or whether he
didn't. The question is the liability on this check.

THE COURT : I will sustain the objection at the present.
If the evidence is necessary you may offer it again in rebuttal.

MR. McLaren : I would like to make a suggestion while
the matter is fresh in Your Honor's mind. That is this : The
defendant sets up in one of its affirmative defenses that if the
government had been as careful as it should have been in
checking up his work it would have detected this fraud at once,
or at least after the first report vv^as sent in. Nov*% the very
purpose of this is to rebut that identical charge. If those
reports were regular in every respect, then there was nothing
to put us upon our guard or notice. The Court will allovr us
an exception.

THE COURT : I will allow an exception. If the evidence
is material at all, it is material in rebuttal of the defendant's
defense.

MR. McLaren : very well.

Q Mr, McCoy, state whether, or not, it is true that these
vouchers, just introduced in evidence, were in accordance with
the usual and regular method of handing in vouchers that was
in use between you and the Department at the time that
they were sent in?

NATIONAL BANK OF COMMERCE. 51

MR. McCORD: I make the same objection to that, Your
Honor.

MR. McLaren : It may be stricken out by consent.

Q Is there anything in the — You say that, along about
October, 1908, the Department changed this system of
vouchers?

MR. McCORD: What do you mean by that?

MR. McLaren : It just means that instead of the voucher
plan, it was done by pay-rolls s^^stem.

MR. McCORD : What date was that made?

MR. McLaren : October 8, 1908.

Q Examine these vouchers for October, 1908, and see if
that was the new or the old system that was employed —

MR. McCORD: I make the same objection to that. Your
Honor. It is referring to the vouchers which were not ad-
mitted in evidence.

THE COURT: Objection sustained.

MR. McLaren : I ask an exception.

THE COURT : Exception allowed.

MR. McCORD: These same questions I suppose will all
go out there, won't they, Mr. McLaren?

MR. McLaren : I am just checking it down to each point.
You better ask the question each time and have the Court's
ruling on it.

Q That is for sustenance?

A Yes sir.

Q You retained the individual voucher system for sup-
plies and material?

A Y^es sir.

Q How is it, Mr. McCoy, that no vouchers are found for
the last two months' issue of fraudulent checks, that is, the
months of July and August, 1909— did you ever send in any
vouchers for those two months?

THE COURT : I will sustain the objection.

Q It is true, is it not, that the vouchers that you sent in

52 UNITED STATES OF AMERICA VS.

for all of the other mouths were apparently regular and were
in the usual form and manner?

THE COURT: Objection sustained.

ME. McCORD: Q When were you arrested?

A September, 1909, about September 1st.

Q You say, Mr. McCoy, that you sent in statements to
the Department quarterly, will you examine these — Referring,
Mr. McCoy, to the Toucher for October, 1908, and the other
vouchers covered by the fraudulent period, whom did you say
these vouchers were sent to?

A To the Commissioner of the General Land Office.

Q And were sent quarterly?

A Quarterly.

Q Xow will you explain, Mr. McCo}^, Avhat these accounts
are, which I hand you, and which are signed by M. P. McCoy,
special disbursement account?

A That is an account current for the quarter.

Q Covering the period from October 1st, 1907, to Sep-
tember 31st, 1907?

A Yes sir.

MR. McLaren : Mr. McCord, that should be December
31st, the quarter commencing October 1st.

MR. McCORD: It is September here.

Q When you sent these quarterly account current in which
you say you did quarterly, did you, or did you not, transmit
with them the individual vouchers covering that same jjeriod?

A Yes sir.

Q Take the next one, from January 1st, 1908, to March
31st, 1908, is that your signature?

A Yes sir.

Q The same is true as to that?

A Yes sir.

Q The same is true as to all the vouchers down to a certain
point ?

A Yes sir.

NATIONAL BANK OF COMMERCE. 53

Q Now calling your attention to tlie account current from
July 1st, 1908, to September 30tli, 1908.

A It is not true of that one. That is not the same thing

I had in mind.

Q Take up the one, running from October 1st, to Decem-
ber 31st, 1908, and examine the leaflets on the inside, the out-
line of expenditures, the first item, October 31st, is the pay-
roll— That was the pay-roll system?
A Yes sir.

Q Now examine all of these quarterly accounts current,
which I hand you, they are all signed by yourself, are they
not, as special disbursing agent?
A Yes sir.

Q These were sent in by you quarterly?
A Yes sir.

Q And, so far as their form is concerned, they were in
due and proper form as was the customary practice of the
Department ?
A Y^es sir.

Q Did these vouchers for expenditures, and also the pay-
roll vouchers referred to in each of these accounts current,
include these fraudulent checks. Exhibit "A"?
A Yes sir.

MR. McCORD: Do you want to offer those?
MR. McLAREN: Yes, I offer in evidence now as Plain-
tiff's Exhibit "C" the quarterly accounts current as follows:
October 1st, 1907, to December 31st, 1907 ; January 1st, 1908,
to March 31st, 1908; April 1st to June 30th, 1908; and so on
down to June 30th, 1909.

MR. McCORD: I object to them as incompetent, irre-
levant and immaterial.

MR. McLAREN: The Court, I presume, will make the
same preliminary ruling?

THE COURT : The same ruling.

MR. McLAREN: Allow us an exception.

THE COURT : Exception allowed.

54 UNITED STATES OF AMERICA A'S.

Q Mr. McCoy, you sent in no quarterly account for the
period after June 30tli, did you?

A No sir.

Q The quarterly account was not yet due at the time you
were arrested, is that the reason?

A Yes sir.

Q Is there anything on the face of these quarterly ac-
counts, or upon the individual vouchers or pay-rolls vouchers
that indicates any irregularity, or that indicates the practice,
or I should say the fraudulent practice or scheme that you Avere
carrying on?

MR. McCORD: I object to that as calling for the con-
clusion of the witness, that being the very thing that the jury
is to pass upon, and I object on the further ground that it is
incompetent, irrelevant and immaterial, and not the best
evidence.

MR. McLaren : it raises practically the same question,
Your Honor, as to the regularity of the reports he was send-
ing in.

THE COURT: Objection overruled. I will sustain that.

MR. McLaren : Beg Your Honor's pardon.

THE COURT : I will sustain the objection.

MR. McLAREN: I ask an exception.

THE COURT : Exception allowed.

Q State what that paper is.

A An account current.

Q For the period ending when?

A September 30th, 1907.

Q Beginning July 1st, 1907?

xV Yes sir.

Q Any fraudulent items included in that account current?

A There were.

Q None of them covered by these checks — I will change
the form of that question — Is tliat the usual form for the
quarterly account that was in use?

A Yes sir.

NATIONAL BANK OF COMilERCE. 55

Q Can you tell, from an examination of it, whether or not
any of these items were improperly allowed?

A Not from an examination of this alone, I would have
to have the checks that correspond and then I could tell.

MR. McLAREX : I offer plaintiff's Exhibit ''D", a quar-
terly^ account.

MR. McCORD: I object to it as incompetent, irrelevant
and immaterial and not properly identified.

MR. McLaren : That is offered, Your Honor, for the
purpose of comparison of the regular quarterly account that
the witness was sending in with the fraudulent one covered by
those checks.

THE COURT : I will sustain the objection.

MR. McLaren : I ask an exception.

THE COURT: Exception allowed.

Q You are living in Spokane, Mr. McCoy?

A Yes sir, I am.

CROSS-EXAMINATION

BY MR. McCORD :

Q How long did you say that you occupied the position
of examiner of surveys and special disbursing agent?

A I had the position of examiner of surveys for about
nine years, and during four or five years of that time I was
special disbursing agent.

Q Prior to the time that you became special disbursing
agent, who attended to that duty of disbursing?

A I did the disbursing. I paid the expenses of the men
and rendered my account to the General Land Office and was
reimbursed by check from the Interior Department.

Q Who advised you in the first instance?

A The Department advised me in the first instance, of
what was necessary.

Q Y^ou advanced your own money?

A Y^es sir.

Q After that time you adopted the system—

56 UNITED STATES OF AMERICA VS.

MR. McLaren : You don't mean that lie adopted the
system, the office adopted the system, of course.

Q After you became disbursing agent and also examiner
of surve3% I will ask you where jou maintained your office,
if you had one?

A I had no office.

Q You attended to the surveys in Washington, Idaho and
Montana ?

A Yes sir.

Q Did the Government have any other agent, or assistant
but you in the transaction of this business?

A No sir.

Q Did they have any other person, or individual or agent
upon the ground to assist you in doing this work, or to check
your accounts?

A Do you mean, now, assistants who I employed myself?

Q. Employed by the Government.

A Well they were employed by me for the Government.

Q Who did you employ?

A My assistants in the field?

Q Yes sir.

A Well, I supposed — I employed assistants to assist me
in making the examination of the surveys.

Q Did the Government employ any other men to aid you?

A No sir.

Q In checking your accounts as special disbursing agent —
Did the Government check your accounts?

A The Department have special distributing agents —
their usual custom.

Q Thej sent men to Seattle to examine them or do it at
Washington?

A At the General Land Office at Washington.

Q Were they out here, at any time, by any bodj' ?

A Not that I am aware of.

Q How did they detect your fraudulent scheme?

NATIONAL BANK OF C0M:MERCE. 0<

A Mr. Good, I forget his initials, a special agent of the
Land Office, discovered it there in Montana.

Q Yon were not checked up in 3"our field work, or in your
agents' work by anybody until shortly before you Avere ar-
rested during the whole period of time that you were in the
service of the Government, is that right?

A That is right,

Q How many surveys did you attend to — about, in a gen-
eral way, about how much money did you expend legitimately
in the service of the Government between 1900 and 1909?

MR. McLaren : I object to that as incompetent, irre-
levant and immaterial and also as calling for a conclusion of
the witness.

THE COURT: The objection is overruled.

A I don't remember.

Q Give it to me approximately.

A Without looking up the records, I could not say.

Q In the year 1900, when you went to work for the Gov-
ernment in the capacity of examiner of surveys, until the time
of your arrest in 1909, state approximately how much money
you expended legitimately for the Government, how much per
year would you estimate it?

MR. McLaren : I make the same objection.

THE COURT : The objection is overruled.

MR. McLaren : I ask an exception to each of those
rulings.

THE COURT: Exception allowed.

A Well, I could not approximate it without looking over
my —

Q Well, about how much business were you doing — You
can tell about how much you would do in a year — I am not
trying to trap you into anything.

A If I could give you an approximate statement, I would
gladly do so, but without going over the records, I don't see
how I could do so.

Q iVs much as five thousand dollars?

58 UNITED STATES OF AMEKICA VS.

A No sir.

Q One half of that, twenty-five hundred dollars?

A No sir, nothing like that.

Q One thousand a year, vrould you say?

A The very outside limit would be one thousand dollars,
I should say.

Q At any time, did the Government send any one else, so
far as you know, to check up your work and see whether this
money had been legitimately expended?

A No sir.

Q You have misunderstood the question, Mr. McCoy, have
you not?

A It is only a surmise on my part, but I think there was
a survey over in the extreme northeast part of Montana, over
which several claimants were in litigation, and I think possibly
that it was reported that I had not been on the ground to make
my examination.

Q What did this work consist of, examining of surveys?

A The Government has public lands throughout these
states and they make surveys of them.

Q This is done by United States Deputy Surveyors?

A Yes sir.

Q For the Government?

A Yes sir.

Q What did you do?

A Before the Government would accept it, I was sent into
the field to make an examination of the survey, whether it was
in acceptable form, whether it was correctly done.

Q Did you go out and run the lines over and resurvey it?

A I was to approximate ten per cent of the lines run by the
party.

Q As much as ten per cent?

A Yes sir.

Q You were supposed to hire assistants to do that?

A Yes sir.

O Survevors?

NATIONAL BANK OF COMMERCE. 59

A Yes sir.

Q Now, Mr. j^IcCoj^, you have identified a bunch of checks
here, plaintiff's Exhibit "A", how do you know that these
checks are the ones that you issued fraudulently — How can
you tell?

A By recognizing my handwriting.

Q Ever3^ one is a diffei'ent one, is it not?

A Yes sir.

Q And each individual check has a different signature —
Do you mean to tell me that, from an examination of these
checks that jon can tell which ones you forged and which ones
the signatures are legal?

ME. McLAEEN: I object to the question as assuming
that there is a different payee for each check, which is not the
case. There were only twenty-nine different payees in the
checks, Your Honor, but the checks themselves number over
approximately a hundred.

MR. McCORD : I think the question is a proper question,
Your Honor, to show how he got at this.

MR. McLaren : I withdraw the objection.

A I identify these from my own signatures on the check.

Q When did you do that?

A At the time the check was issued.

Q When this list — When these checks were selected out,
did you select them?

A No sir.

Q Who did?

A I couldn't tell you.

Q Did you go over the various checks that had been re-
turned, with any body in Washington and assist him in picking
the forged checks, that is, those that you forged?

A No sir.

Q You did not?

A No sir.

Q You have onl}^ made a cursory examination of these
checks today, have you not?

60 UNITED STATES OF AMERICA VS.

A Yes sir.

Q, You have not taken up each one individually and gone
through them?

A Yes sir, each check.

Q Have you examined the signature on each one?

A Yes sir.

Q I would just like to have you tell me how you can re-
member five years after each one of these was taken which are
genuine and which are not.

A Well, I know that, during the time that these were is-
sued, that I issued nothing but fraudulent checks.

Q Did you issue, at any time during the period from 1907
to 1909, anything but fraudulent checks— You don't mean that?

A None except those that were payable to myself.

Q From 1907 to 1909 you did nothing then — you did not
issue a single check that was valid?

A Except those to myself.

Q Except the two hundred and seventy dollars a month?

A Yes sir, my salary.

Q Everything else was fraudulent?

A Yes sir.

Q, You did no work?

A I was doing work, but instead of passing checks to the
parties that I employed in the field, I would pay them per-
sonally.

Q How much did you pay out in that way?

A I am unable to state.

Q About how much would these checks amount to, fifteen
thousand dollars, about how much did you expend out of your
own funds?

A I don't think I could even approximate it.

Q Would you say that you had expended five thousand,
one third of that?

A No sir.

Q About four thousand dollars?

A About a couple of thousand dollars.

NATIONAL BANK OF COMMEECE. 61

Q You have no waj' of arriving at tiiat estimate?

A No sir, I have no records.

Q Yon tMnk that you have spent about a couple of
tliousand, or it may be more?

A It may be more or it may be less.

Q It may have been as high as five thousand dollars?

A I don't think it was as high as five thousand.

Q As much as four thousand?

A I don't think it was over a couple of thousand.

Q What were you doing — l^ou say that you paid some men
for services rendered, and that you paid it out of your ovrn
nioney — Do you know of any of the men that you paid it to?

A No sir, I do not.

Q Can't you recall any of them?

A No sir.

Q What work did they do for which you paid them?

A Some vx^ere chainmen and some were flagmen and some
were teamsters and some of them were stage drivers and some
of them livery stable people.

Q You did go over onto the different surveys, during the
period from 1907 to 1909, to September, 1909, you did carry
on the checking of these surveys?

A Only a part of them. I did a few of them.

Q You were on all of them, were you. not, v%ith the ex-
ception of the one in northern Montana?

A No sir,

Q How many all together?

A I am unable to approximate. The records of the office
will show, and I could not even approximate without having
those records.

Q You made up reports on these various surveys and sent
them in to the Government?
A Y^es sir,

Q These reports showed that you had run the lines on at
least ten per cent of the surveys, the deputy surveyor's work?
A Yes sir.

62 UNITED STATES OF AMERICA VS.

Q Is that right?

A Yes sir.

Q You mean to be understood that you did run ten per
cent?

A Yes sir.

Q On some you did not run quite ten per cent?

A I only mean to approximate it.

Q You actually did the work of about ten per cent of the
most of them?

A No sir, on a few of them.

Q On others you did part of the work and certified that
you did it all.

A Yes sir.

Q On all of them, with the exception of in Northern Mon-
tana, you did some work?

A No sir.

Q What others?

A Well, in quite a majorit}" I did not examine in the field
at all.

Q Didn't do any field work at all?

A No sir.

Q You had nobody do it?

A No sir.

Q You cannot tell now a single man who worked for you,
that you paid, between 1907 and 1909?

A No sir, not a single man.

Q Not a single man?

A No sir.

Q Where did you keep this money, at Seattle?

A No sir, on the ground. That is, wherever I happened
to be making examinations of surveys.

Q What sort of a report would you send in v.itli the vouch-
ers, would you draw a plat showing the survey?

A No sir, I would send in the field notes covering the
ground.

NATIONAL BANK OF COMMERCE. 63

Q You would send iu the field notes you had gotten from
the deputy surveyor's work?

A I didn't get them from the deputy surveyor, I got them
from the Surveyor General's office.

Q You used the same notes in sending them in?

A Yes sir.

Q If you had done the vrork individually, they would not
have checked with the work in the Surveyor General's office,
would they — If you had made these surveys and run your own
lines, it would not have checked correctly with the work in the
Surveyor General's office, would it?

A Xo sir.

Q In checking, did you simply try to run over the lines
made by the deputy surveyor on the ground and find his monu-
ments ?

A Yes sir.

Q And during this time, a period of two years, you simply
copied the notes from the Surveyor General's office?

A They were not copied, they were faked, we made our —

Q They were taken from the Survevor General's office?

A The only data we had was taken from the Surveyor
General's office.

Q They were reproductions of his notes?

A No sir.

Q You went to the Surveyor General's office and copied
them?

A Yes sir.

Q Copied them as they were shown in his office?

A No sir, but I would not send in notes unless they would
correspond in a general way.

Q You Avould modify them in some way?

A Y^es sir.

Q Well, now then, how did you do when you actually re-
run the lines, did you try to make changes in them?

A No, I would return the conditions as I found them. I

62 UNITED STATES OF AMERICA VS.

Q Is that right?

A Yes sir.

Q You mean to be understood that jou did run ten per
cent?

A Yes sir.

Q On some you did not run quite ten per cent?

A I only mean to approximate it.

Q You actually did the work of about ten per cent of the
most of them?

A No sir, on a few of them.

Q On others you did part of the work and certified that
you did it all.

A Y"es sir.

Q On all of them, with the exception of in Northern Mon-
tana, you did some work?

A No sir,

Q What others?

A Well, in quite a majority I did not examine in the field
at all.

Q Didn't do any field work at all?

A No sir.

Q You had nobody do it?

A No sir.

Q You cannot tell now a single man who worked for you,
that you paid, between 1907 and 1909?

A No sir, not a single man,

Q Not a single man?

A No sir.

Q Where did you keep this money, at Seattle?

A No sir, on the ground. That is, wherever I happened
to be making examinations of surveys,

Q What sort of a report would you send in v.itli the vouch-
ers, would you draw a plat showing the survey?

A No sir, I would send in the field notes covering the
ground.

NATIONAL BANK OF COMMERCE. 63

Q You would send in the field notes you had gotten from
the deputy surveyor's work?

A I didn't get them from the deputy surveyor, I got them
from the Surveyor General's office.

Q You used the same notes in sending them in?
A Y^es sir.

Q If you had done the v\'ork individually, they would not
have checked with the work in the Surveyor General's office,
would they — If you had made these survey's and run your own
lines, it would not have checked correctlj^ with the work in the
Surveyor General's office, would it?

A No sir.

Q In checking, did you simply try to run over the lines
made by the deputy surveyor on the ground and find his monu-
ments ?

A Yes sir.

Q And during this time, a period of two years, you simply
copied the notes from the Surveyor General's office?

A They were not copied, they were faked, we made our —

Q They were taken from the Surveyor General's office?

A The only data we had was taken from the Surveyor
General's office.

Q They were reproductions of his notes?

A Xo sir.

Q You went to the Surveyor General's office and copied
them?

A Yes sir.

Q Copied them as they were shown in his office?

A Xo sir, but I would not send in notes unless they would
correspond in a general way.

Q You would modify them in some way?

A Y^es sir.

Q Well, now then, how did you do when you actually re-
run the lines, did you try to make changes in them?

A Xo, I would return the conditions as I found them. I

64 UNITED STATES OF AMERICA VS.

would take my own field notes and my reports would be exact
copies of my own field notes.

Q Wherever you found the monuments made by the sur-
veyor, in those cases the notes would be identical, but in those
notes that you faked from the notes in the Surveyor General's
office —

A So far as the monuments and as to the topography,
they were not the same.

Q When you faked the notes you were not the same?

A It is seldom that any two men write up the same notes
after going over a certain line.

Q Now then, these checks that you draw, where did you
cash them, Mr. McCoy?

A At dilf erent places around over the country.

Q Tell me how you would do it, take the first check for
Albert Peterson, for twenty dollars —

A May I see the check, please?

(Exhibit "A" shown witness.)

Q The one on the top there, the back of the check shows —

MK. McLAREX: For the benefit of the jury, the check
referred to now is October, 1907, the first one.

A That I cashed it through the National Bank, or the
Columbia Valley Bank of Wenatchee.

Q Did you take it there yourself?

A No sir.

Q How did you arrange that?

A I sent these checks to this bank, under the name of
J. D. King.

MR. McLAREN: You mean this particular check, you
didn't send all of them?

A This particular check.

Q J. D. King, who was he?

A A fictitious name, the same as the rest. I sent these
cheeks to the Columbia Valley Bank in the name of J. D. King.

Q By mail?

A Yes sir.

NATIONAL BANK OF COMMERCE. 65

Q From where?

A From the points, I don't remember now.

Q Did the bank send these checks —

A I opened up an account with the bank and sent these

checks for collection.

Q You opened up an account in the first place?

A On this particular check as J. D. King.

Q Did you go there to open it?

A No sir, by mail. I sent these checks by mail in the
first place.

Q You opened an account by mail?

A Yes sir.

Q Then you checked it out in the same name?

A Y'es sir.

Q \"ou forged the name of King to these checks?

A Y"es sir.

Q How did you get the money — How did they send it

to you?

A Then this was checked out in my favor by this man
J. D. King, this fititious King.

Q You cashed the checks in that way and sent to you by
mail ?

A Yes sir.

Q Were you ever in the Seattle National Bank?

A Yes sir.

Q Do you remember of any checks paid by them?

A Y^es sir.

Q How did you manage that?

A Under the name of F. M. Clark

Q Did you open an account under that name?

A Y^es sir.

Q Y^ou went in personally?

A Yes sir.

Q You would go in there and deposit them yourself?

A Yes sir.

Q From time to time?

66 UNITED STATES OF AMERICA VS.

A Yes sir.

Q And then check them out?

A Yes sir.

Q How about the Mutual National Bank, how did you
manage that?

MR. McCORD: Montana National Bank it means, I
suppose.

MR. MCLAREN: Yes.

A That was done b}^ mail, under another name.

Q Where from?

A From some part of Montana, wherever I happened to
be. I was at different points in Montana.

Q Would 3^ou send more than one check at a time?

A Yes sir. I would generally send the bunch for the
month.

Q And have them placed to your account?

A Yes sir, to the account of these fictitious names.

Q King?

A Yes sir, or Clark.

Q Did you have more than one fictitious name?

A Y^es sir, the first was J. D. King.

Q How many accounts did you have with the various
banks — You had one under the name of J. D. King and one
Clark, and what else?

A That is all.

Q And this was done under these two names?

A Yes sir, as I remember.

Q Then you would forge the name of King on the check
and make it payable to your order?

A Yes sir.

Q You didn't go and draw the money yourself?

A No sir. It was sent by draft to me at Seattle, and I
would check it out from wherever I would happen to be.

Q When did you open the account with the National Bank
of Commerce, or did you open it?

NATIONAL BANK OF COMMERCE. 67

A The National Bank of Commerce, I opened an account
there when they adopted this disbursing agent system.

Q Did 3^ou have the opening of the account yourself, or
was it done from Washington?

A The deposit was made there from Washington, and I
was notified of the fact.

Q The deposit was made from Washington?

A To my credit.

Q As M. P. McCoy, Special Disbursing Agent?

A Yes sir.

Q* This was how the account was opened up?

A Yes sir,

Q You were directed to go there and leave your signature?

A Yes sir.

Q You went there and left your signature?

A Yes sir.

Q And you drew your money out of that account for vari-
ous purposes connected with the Government?

A Y'es sir.

Q kSouic that were legitimate, and some that were not,
that is right, is it not?

A I checked that money out through other banks.

Q What—

A That is on checks cashed in other banks.

Q You drew checks?

A Yes sir and cashed the checks.

Q Every one of these checks contains your genuine signa-
ture?

A Yes sir.

Q And all of these in this bunch, to the best of your
knowledge, are fictitious?

A Yes sir.

Q Is there anything on the face of these checks to advise
or indicate the fact that there was anything fraudulent about
them, was there?

68 UNITED STATES OF AMEEICA VS.

MR. McLaren : winch bank, the National Bank of Com-
merce ?

A No sir, they are regular in every way.

Q The contents and endorsements are what the law re-
quired to be put upon them?

MR. McLAREX : I object to that as calling for a conclu-
sion of the witness.

THE COURT : I sustain the objection.

Q That is on all of them?

A Yes sir.

Q Did you put the — I notice some of them have a voucher,
number one voucher from the 6th to the 16th you showed these
vouchers to the bank, did you?

A No sir, these vouchers were sent with my quarterly re-
port to the land office at Washington.

Q You put in these all of the pay-rolls and sustenance
and so on — I notice that some of them, or at least I thought
some of them had no — did not have vouchers on them?

A The last ones, several of them are there not?

Q Some of these in April — In August 1909, examine these
for August, 1909, did you put notations" —

MR. McCORD: I withdraw that question.

Q Did you exhibit your pay-rolls to the bank?

MR. McCORD : It is on the next page.

A No sir.

Q I see these checks, one bunch of them seems to have
been paid direct, or part of these checks, take for instance the
one for one hundred dollars, to J. D. King, the check is dated
August 31, 1909, for one hundred dollars, number 13, and
August 31, 1909, for sixty-tvro dollars, in fact all of these for
August, with the exception of one or two seem to have been
drawn direct without the intervention of any other bank, were
they not?

A No sir, these Avere paid through the Seattle National
Bank and are stamped indistinctly on the back of them there.

Q They were paid through the Seattle National Bank?

NATIONAL BANK OF COMMERCE. 69

A Yes sir.

Q Now you referred to your instructions a ^yllile ago, from
the Government, tliey authorized you, when this deposit was
put there to sign checks for this money in drawing it out, did
it not?

ME. McLAKEN: I object to that question as calling for
a conclusion of the witness and not the best evidence as to
whether the letter of instructions authorized him to sign these
checks.

( Discussion. )

THE COURT : I will overrule the objection.

A Yes sir.

Q You had authority from them to draw checks?

A Yes sir.

Q You showed that authority to the bank, I presume, you
must have, did you not?

A Yes sir, I showed my letter of instructions to Mr. Max-
well, who was at that time cashier of the bank.

Q And these instructions that you got, you just exhibited
them to him did you not?

A Y"es sir.

Q You didn't give him any other instructions?

A Xo sir.

Q Just let him read your instructions?

A Yes sir.

Q The bank had no other instructions, except from reading
your letter?

A I don't know, but I presume —

Q I don't want any of your presumptions— You don't

know?

A I don't know. That letter instructed me to sign checks
as Special Disbursing Agent.

Q No limitation was placed by that letter, or was placed
on the bank by that letter, to paying any checks signed by you?

A No sir,

Q There were no conditions, it had been remitted direct to

70 UNITED STATES OF AMERICA VS.

the bank to take your signature, and directing you to draw it
out upon your signature, that was the size of these instruc-
tions, was it not?

A Yes sir, the purport of them.

Q That is the substance?

A I don't remember the wording exactly, but that is the
substance or object of the letter.

Q To advise the bank that you had authority to draw any
money placed to your credit as Special Disbursing Agent?

ME. McLAKEN : I object to that as calling for a conclu-
sion of the witness as to the authority contained in the letter.

THE COURT : I overrule the objection.

MR. McLaren : Exception.

THE COURT : Exception allowed.

A Yes sir.

Q Now the bank, every month, rendered you a statement
of your account, did it not?

A Yes sir.

Q And the vouchers, or the checks that you had used were
not returned to you?

A No sir.

Q A list of them was returned to you in a statement of
account?

A Yes sir.

Q Also the vouchers themselves and a statement were sent
to the Department at Washington by the bank — That is the
checks were sent to Washington?

A I don't know.

Q You don't know what the custom was?

A I presume they were but I had no means of knowing.

Q Your account was balanced up every month?

A Every quarter, yes sir.

Q Every month?

A No sir.

Q Was it every quarter?

A Every quarter.

NATIONAL BANK OF COMMERCE. 71

Q The cancelled checks were sent to Washington— You
understand that it is customary to send them to Washington?

A Yes sir, I do now.

Q These checks, so far as you know, were all sent to
Washington at least every three months?

A Yes sir, I presume they were.

Q So that your account was balanced up every month be-
tween you and the bank?

A Yes sir.

Q The bank rendered you a statement every month?

A Yes sir.

Q They didn't wait until the end of the quarter, but ren-
dered it every month to you?

A Yes sir.

Q They didn't render any to the Department at Wash-
ington ?

A I don't know, I am sure.

Q Did the Government, prior to September, 1909, ever
make any complaint or criticism of your acts or your dealings
with the Government in regard to these examinations of sur-
veys?

A No sir.

Q They never offered any criticism at all of any kind?

A Oh, once in a while there would be some item suspended
for explanation, as for instance a telegram, a copy of which
would have to be sent. Where I had failed to send a copy, or
something like that, or some clerical error.

Q As I understand it, you sent in until October, 1908,
you sent in to the Department at Washington vouchers for
everything that you expended?

A Y^es sir.

Q Purporting to be signed by the men who had done the
work or furnished the supplies?

A Yes sir.

Q That is true, is it not?

A Yes sir.

72 UNITED STATES OF AMERICA VS.

Q These were sent in monthly, were they not?

A Prior to the adoption of the Special Disbursing Agent,
yes sir.

Q After the adoption of the Special Disbursing Agent
scheme, they were sent how often?

A Quarterly.

Q When was the disbursing agency feature adopted?

A I think after the first of October, 1908. That is when
we began.

Q After the account was opened up in the bank in your
name as Special Disbursing Agent and as examiner of Surveys,
from that time you sent in your vouchers quarterly?

A Yes sir.

Q And continued to do that until October, 1908, did you?

A I continued to do that until my arrest in 1909, Sep-
tember, 1909.

Q You sent in the vouchers, as well as the payrolls?

A No sir, sent in the payrolls after we adopted that plan.

Q October, 1908?

A Yes sir, prior to that time sent in vouchers.

Q You continued to send in payrolls quarterly after Oc-
tober, 1908.

A Yes sir.

Q So that throughout the whole history of these trans-
actions, from the time you opened the account in the Bank of
Commerce, until you were arrested, you sent in, every three
months, vouchers for every dollar you claim to have expended?

A Yes sir.

Q These vouchers were used until October, 1908?

A Yes sir.

Q After October, 1908, the labor and services went in
under the payroll?

A Yes sir.

Q You continued to have each member of the payroll sign
that voucher?

A Yes sir.

NATIONAL BANK OF COMMERCE. 73

Q They signed the payroll, each member that jou claimed
pay for services?

A They signed the payroll, yes sir.

Q Other services were on independent vouchers?

A Yes sir.

Q That was up to the time of your arrest?

A Yes sir.

Q The Government, at all times then, from 1907 up until
the time of your arrest on September 1st, 1909, had these
vouchers in its possession?

A Yes sir.

Q Now the Government could, very easily, by sending
men out to check up the ground work and field work have
ascertained that you had never been over it, could the^'^ not?

A Yes sir.

Q And that is the way that they finally stumbled onto
the illegal practice?

A Yes sir.

Q Or it was an easy matter, was it not, to have found out
from the people in the vicinity that you had not done this
work, was it not, Mr. McCoy?

A Except in the sparsely settled districts.

Q If they had made any investigation at all, or if they
had enquired for any of these men you claim to have paid
money to, they could have ascertained that the men could not
have been produced?

A Yes sir.

Q So that by the simplest sort of an investigation they
could have found out that there were no such people in exist-
ance as those whose names you had given?

A Yes sir.

Q Did they ever inquire from you, as to the men who
composed these accounts, as to their residence or postoffice
address of any of these individuals to whom you claim to have
paid money?

74 UNITED STATES OF AMERICA VS.

A I think each voucher shows the postoffice address of
each man who signed tlie voucher.

Q And all of these were fictitious and there was no such
person at that place?

A No sir.

Q And a letter addressed to them would have been re-
turned uncalled for?

A Yes sir.

Q I don't want to embarrass you, Mr. McCo}', but I want
to ask you the question because I think it is necessary — When
were you arrested and where?

A It was about the first of September, 1909.

Q Where were you arrested?

A At the Lincoln Hotel at Seattle.

Q With what offense were you charged?

A The offense of embezzlement of Government funds.

Q Of what particular embezzlement were you charged
with?

A I don't remember.

MR. McLaren : I will stipulate that he was indicted,
arrested and sentenced for embezzlement covered by the checks
shown in Exhibit "A."

MR. McCORD : You said you would produce the indict-
ment.

MR. McLaren : Do you want the indictment now?

MR. McCORD : No, you can put it in. The indictment
will be introduced showing the charge against him.

A Do you know what particular checks made up those you
were arrested for embezzling on? What the particular funds
were?

A I don't remember. I was rather embarrassed at the
time the indictment was read to me, and I don't remember.

Q You were sentenced in Seattle?

A In Tacoma.

Q Were 3'^ou tried?

A No.

NATIONAL BANK OF COMMERCE. 75

Q You pleaded guilty to the indictment and you say that
you don't know what was in it?

A No sir, I don't remember now.

Q You are now out on parole?

A No sir, I am at liberty, my parole exx^ired on the 19th
of last month.

Q So you are completely freed?

A Yes sir.

Q You are not pardoned?

A No sir.

Q So that your civil rights have not been restored?

A No sir.

Q Did you not make any application in person?

A No sir. I made an application for a parole and it was
granted.

Q Mr. McCoy I will have to go into those a little more
in detail, as I don't know how all of these different names here,
that is the names of H. M. Benson, A. C. Jenkins, Charles
Paine, George K. Cooper, E. M. Bassett, Joe Mikel, A. J.
Whitney, F. W. McCulley, George D. Cook, F. M. Clark and
J. D. King,"—

MR. McLaren : Those are the names referred to in the
checks. — "all covering the month of August, 1909, I want you
to tell me, if you can, how you can go through those and tell
now, after the elapsing of five years, which ones of these signa-
tures are fraudulent, and which are not, or that all of them
are — I ask you whether you can do that from any independent
examination of the signatures, as they now appear, or can you
tell only because you were not doing any work during this
period of time?

A I could not identify these from these fictitious signa-
tures, but I can identify them from my own signature having
issued the checks.

Q Well your signature does not appear on any of those
checks — that is the signature of M. P. McCoy, except as the
drawer of the check?

76 UNITED STATES OF AMEKICA VS.

A That is all.

Q Can you inclependently say that all of these names
placed on these checks and made by you, can you tell now from
an examination of those signatures at this time — I don't see how
it is possible — Tell me whether if you didn't have these passed
up to you, and without any other information, whether you
could tell whether these were forgeries?

A No sir, it would be impossible for me to tell.

Q If you saw the checks you could not tell that they were
forgeries, except, as you say, between 1907 and 1909, you say
that you did not issue any legitimate checks?

A Yes sir.

Q That is the only way you can tell?

A Yes sir,

Q That is also true of the vouchers, is it not, you could
not tell that these were forgeries on the vouchers from an
inspection of the vouchers at this time?

A Yes sir,

Q How?

A Simply by knowing that they were fraudulent.

Q I say by an examination of the voucher itself, inde-
pendent of your personal knowledge, you could not tell, it
would be an impossibility?

A No sir.

Q Now, Mr. McCoy are you not mistaken in saying that,
from 1907, the date of the first of these checks, October 14,
1907, to September 30, 1909, two j^ears that you did not issue
a single genuine check?

A Not as against the National Bank of Commerce.

Q How do you know that? You transacted business and
had men in your employ, and were paying them from some
source or other, now is it not possible that some of these
checks that you drew were payable for a legitimate purpose
and to the men who earned the money?

A No sir.

Q Why do you say that?

NATIONAL BANK OF COM:^IEECE. li

A Because whenever 1 incurred expenses in the field I
paid it to the individuals themselves, and in order to carry
this thing through I would issue checks against the National
Bank of Commerce but only those that were fictitious.

Q What work were you doing from October, 1907, to Sep-
tember 30, 1909, what particular surveys were you examining?

A Surveys in the states of Washington, Idaho, and Mon-
tana. The records would show the title of each survey that is
to whom contracts were let, but who they were now, I cannot
recollect.

Q You are sure that you never drevr any checks in their
favor on the National Bank of Commerce?

A I am sure of that.

Q But you used the money that you got from the Na-
tional Bank of Commerce in paying them?

A Yes sir, except those payable to myself.

Q The money that you got on these fraudulent checks- you
used, in part, to pay these men?

A Y'es sir,

Q How much you have no means of knowing?

A No sir.

Q Otherwise that it is from one to four thousand dollars?

A Yes sir, somewhere within those sums.

Q But you did render seervices to the Government, valu-
able services, during that period, did you not in examining
these surveys?

A Yes sir.

Q And employed men to assist you in getting the informa-
tion you did furnish the Government?

A Yes sir.

Q And you did have men employed by you in examining
surveys for the Government?

A Yes sir.

Q I would like to — If you can give me some more correct
information as to the amount of money you spent on each
particular survey, the number of men you would employ and

78 UNITED STATES OF AMERICA VS.

I would like to have you try to recall, Mr. McCoy, about how
much money you spent legitimately from 1907 to 1909, that
you paid for out of funds that you carried in this bank?

ME. McLaren : Q Is it your testimony, Mr. McCoy, that
the actual services which you did pay for during this period,
were paid out of these fraudulent checks, or did you put in a
personal check to pay for these services?

A I got this money individually.

Q Out of the proceeds of your personal checks?

A I paid them with my own money.

Q I want to get this clear — During the time that these
fraudulent checks were sent in by you, you also sent in checks
payable to yourself for different amounts, did you not?

A Yes sir.

Q Was it out of these checks, payable to yourself, that
you paid the men that you had employed, or did you pay these
men out of the proceeds of these fraudulent checks?

A I paid them with my own money. How I obtained that
money, I obtained part of it by my own salary and over time
and part of the money I got from the fraudulent checks.

Q You kept all of this money in the bank?

A Yes sir.

Q The National Bank of Commerce?

A Yes sir.

Q When you got money from these fraudulent checks and
legitimate money, you put them all together in one account?
A Yes sir.

Q Whether it was from one source or the other, part was
from fraudulent sources and part from other sources?

A Yes sir.

Q You could not tell which?

A No sir.

Q You have no doubt but that you paid out from one to
four thousand dollars for the Government in this way?

A Yes sir. T

NATIONAL BANK OF COMMERCE. 79

Q Most of it came from the fraudulent checks, because
there were more of them?

A Yes sir.

Q So that you would say that the biggest part of what
you did pay necessarily came from the money that you got on
these fraudulent checks, that is the legitimate conclusion, is it
not?

A Well, the amount was so small that I was paying out,
compared with what I was getting in, that I would not have
any means of knowing where it did come from.

Q It was all mixed together?

A Yes sir.

Q The money which you did use to pay these legitimate
expenses and labor was money paid out of your own personal
bank account into which you had put the money realized from
these fraudulent checks?

A Yes sir.

Q That is right, is it not?

A Y^es sir.

Q Now take, for instance, the surveys for the year 1907,
can you tell where 3'ou examined one — just recollect one where
you did any work on it?

A Without having the records before me, I could not tell
that.

Q It is possible, is it not, that you have paid out more
than four thousand dollars?

A No sir, I should not estimate it any higher than that.

Q You think that four thousand is the maximum?

A Yes sir.

Q Would you consider that approximately the sum?

A I should say a couple of thousand. It might have been
more or it might have been less.

Q It might have been as much as four thousand?

A It might have been over two thousand.

Q The last one of these vouchers was sent on September
30, 1907?

80 UNITED STATES OF AMERICA VS.

A No sir the last one went in —

Q June 30, 1909?

A Yes sir, June 30, 1909.

Q You didn't send in any after that?

A No sir.

Q But you drew quite a number of checks after that did
you not?

A Yes sir, I drew checks at the end of July and to the
end of August.

Q Did you keep any account in any other bank than the
National Bank of Commerce as Special Disbursing Agent?

A No sir.

Q Did the Government not receipt to you for these vari-
ous accounts that you sent in?

A No sir, it was not their practice, but they did, hoAvever,
at the end of the year send me a statement from the auditor
of the interior department of my account and including the
account for the past year.

Q They verified your account at the end of 1907, did they?

A Yes sir.

Q And verified it at the end of 1908?

A Yes sir.

Q Tell you it was correct?

A Yes sir, letters were sent me from the Auditor of the
Interior — from the Auditor of the Treasurer of the Interior
Department and sent me these statements, at the end of these
periods, stating that my account had been examined and found
correct, or that there were some slight discrepancies and that
they neded correction, or something of that kind.

Q What officer of the National Bank of Commerce, did
you do your business with, Mr. Maxwell?

A It was the young man who had charge of the disbursing
of the Government funds in the rear of the office, I don't re-
member his name, in fact I never knew his name. He was one
of the bank tellers.

Q Ever do business with Mr. Backus?

NATIONAL BANK OF COMMERCE. 81

A No sir.

Q Did you ever do business Avith Mr. Stacey?

A No sir.

Q Did you ever do any business with Mr. Seewell?

A No sir.

Q Mr. Maxwell, you did show him your credentials?

A Yes sir.

Q Did you turn your signature over as Special Disbursing
Agent?

A Yes sir.

Q And your written instructions were to show your or-
ders to the bank, were they?

A I cannot recall exactly, but I was notified of this sum
being placed to my credit in this bank.

Q Y^ou were authorized to draw it out on your signature?

MR. McLaren : I object to that, Your Honor, as calling
for a legal conclusion of the witness.

( Discussion. )

THE COURT : I overrule the objection.

MR. McLaren : Exception.

A Yes sir.

Q You showed that to the bank?

A Yes sir.

Q You didn't tell them anything about your being unlim-
ited in your power to draw that money?

A No sir, I simply showed them my letter.

Q The letter didn't contain any limitations on your
powers?

A No sir.

Q It was an unconditional authority?

A Yes sir, I think the checks were to be signed by myself
as Special Disbursing Agent.

Q With that exception there was no limitation?

A No sir.

Q There was no limitation on the authority of the bank to
pay you money?

82 UNITED STATES OF AMERICA VS.

MR. McLaren : Same objection, Your Honor.

THE COURT : Objection overruled.

MR. McLaren : Exception.

THE COURT : Exception allowed.

A No sir. The letter gave me authority to draw it out
myself on my own order, but I don't think I could have drawn
any checks under that authority payable to myself.

Q It didn't say anything about it at all?

A Well I Avas to draw this money as Special Disbursing
Agent and I don't remember that it limited me at all.

Q You don't think that an^^thing was stated as to any
limitation at all?

A I don't think that there was any limitation stated.

Q When you say that you don't think that 3 ou could draw
checks in favor of your own order, you are getting that from
information other than that contained in the letter?

A Yes sir.

Q There was nothing in the contents of that letter that
indicated that you could not draw it in your own favor?

A No sir, not that I can remember.

RE-DIRECT EXAMINATION

BY MR. McLaren :

Q When were you paroled out, Mr. McCoy?
A March 15th, last.
Q March 15, 1911?
A Yes sir.

Q You have been steadily employed in the City of Spo-
kane for how long?
A Since June 15th.
Q For what firm?
A W. A. Richards, architects.
MR. McCORD : That ought to be Ritchie.
MR. McLaren : Ritchie, yes.
Q Since when?

NATIONAL BANK OF COMMERCE. 83

A June 15, 1911.

Q You have never had any difficulty or trouble with the
Government before this transaction of the fraudulent checks
during all the time you worked?

A I never had any trouble with any body, the Govern-
ment, or any body else.

Q Under your authority from the Government you had no
authority to pay out money, or draw checks against the ac-
count, except in payment of legitimate bills?
' MR. McCORD : I object as incompetent, irrelevant and im-
material, and asking for an interpretation of a question of law
by the witness.

MR. McLAREN : I think that is proper, Your Honor, in
view of the questions asked upon Cross Examination.

MR. McCORD: (Reading) "Under your authority from
the Government, you had no authority to pay out money, or
draw checks against the account, except in payment of legiti-
mate bills?" Now, that is the very question here. Your Honor.
I object to it as incompetent, irrelevant and immaterial and
asking for a conclusion and asking for the interpretation of
the contract, what his authority was.

THE COURT : I sustain the objection.

MR. McLAREN : An exception.

THE COURT: Exception allowed.

MR. McCORD: (Reading) "When you told Mr. McCord
that your letter of instructions" —

MR. McLAREN : That goes with the same ruling. Turn
over to the next page.

MR. McCORD : The next page.

MR. McLAREN: Begin next at the second question on
page 50.

MR. McCORD: The second question?

MR. McLAREN : Yes.

Q During the time covered by these checks, you were not
doing much of any work — Were you doing anything in April,
1908, do you recollect being over at Great Falls, Montana?

84 UNITED STATES OF AMERICA VS.

A I don't remember anything specially.

Q I hand you four vouchers, numbered fifteen, sixteen,
seventeen and eighteen, commencing April, 1908, to J. D. King,
A. M. Anderson, F. M. Clark and Fred Evans, state whether
these were fraudulent?

A Yes sir.

Q You received the money on these vouchers?

A Yes sir.

ME. McCORD: I make the same objection to that, if
Your Honor please. I object to it as irrelevant, incompetent
and immaterial.

MR. McLaren : I offer in evidence now these vouchers.
Plaintiff's Exhibit "E," being Nos. 15, 16, 17 and 18, upon this
theory : it developed on cross examination by Mr. McCord that
there was a possibility, at least a theory that part of the pro-
ceeds of these fraudulent checks might have inured to the
benefit of the government in payment, as the witness testified,
in cash to the men whom he had employed during the period
covered by the checks. I now offer to show by these exhibits
that in addition to monies received by him from the fraudulent
checks, he handed in vouchers which I now offer in evidence,
covering a portion of the same fictitious persons, Anderson,
Clark, King and the rest of them. My position is clear. Coun-
sel contends and will contend I presume from the line of cross
examination developed that even although the money was all
obtained irregularly and fraudulently from the bank, yet if as
a matter of fact he applied a part of that money to the pay-
ment of actual bills, that they are entitled to show that, as the
government would not be damaged by that approj^riation of
that money. Now, I am offering to prove by these exhibits
that there were other monies which were used in pa3anent of
these actual expenses.

THE COURT : As at present advised, I will rule against
you, Mr. McLaren. If I should change my mind about it, I will
let you introduce these. I don't think they are material in
this case at all.

NATIONAL BANK OF COMMERCE. 85

MR. McLAREN: The Court will allow us au exceptiou.
THE COURT : Exception allowed.

Q I hand you voucher for November, to yourself, for two
hundred and seventy dollars— Can you state whether or not
you worked during that mouth of November, 1907?

MR. McCORD : I object to that as immaterial. They are
offering that for the same reason I suppose, Your Honor. He
drew his own check, drawing two hundred and seventy dollars
a month.

THE COURT : I will sustain the objection.
(Discussion.)

THE COURT : I will sustain the objection.
MR. McLAREN: Allow us an exception.
THE COURT: Exception allowed.

MR. McLAREN: Now, the same objection and the same
ruling to the other voucher for December, I presume.

MR. McCORD: How far down is the next one, Mr.
McLaren?

MR. McLAREN: I offer in evidence Plaintiff's Exhibit
"F," being vouchers for the months of November and Decem-
ber, 1907, in favor of the witness.
MR. McCORD: Same objection.
THE COURT: Sustained.
MR. McLAREN: An exception.
THE COURT: Exception allowed.
MR. McCORD : Where do you want me to read now?
MR. McLAREN: I think the next question is open to
question yet.

MR. McCORD: All right. Which one is the next one?
MR. McLAREN: "Now I hand you a certificate, signed
by yourself" — on page 51, about the middle of the page.
MR. McCORD: Yes.

Q Now I hand you a certificate, signed by yourself, for
the month of April, 1908, and I will ask you, if, on the first
page of this, that is your signature "M. P. McCoy, Examiner
of Surveys"?

86 UNITED STATES OF AMERICA VS.

A Yes sir.

Q Calling your attention to the item of disbursements, as
shown by that itemized statement, and calling your further
attention to page two, to a certain entry of expenditures, under
date of April 8th. "To J. J. Carlton, Darby, Montana, for
hire two horses and buggy, with driver, expenses, etc., eighteen
dollars," is that part of a voucher that you returned under that
heading?

A It is.

Q Calling your attention to the second portion, marked
page three, under date of April 30th, 1908, "To J. D. King,
Great Falls, Montana, for services as chainman, from April
19 to 30 inclusive, twelve days, twenty-four dollars." Is that
the same J. D. King the fictitious person?

A Yes sir.

Q To F. M. Clark, Great Falls, Montana, services as chain-
man, twelve days, two dollars, twenty-four dollars, is that
the same fictitious person?

A Yes sir.

Q Fred Evans, Conrad, Montana, for board and lodging
assistants, J. D. King and F. M. Clark, John Howard, E. M.
Roper and A. M. Anderson, forty-five dollars and six cents,
those are the same fictitious persons?

A Yes sir.

Q Calling your attention to page two of this itemized
statement, April 21st., "To J. L. Murray, Helena, Montana,
for board and lodging assistants J. D. King and F. ]M. Clark
April 21, four dollars." Those are fictitious persons are they?

A Yes sir.

Q Ray Jones, Great Falls, Montana, for board and lodg-
ing assistants, J. D. King and F. M. Clark, April 22nd, three
dollars, that is fictitious, is it not?

A Yes sir,

MR. McLaren : I offer in evidence now Plaintiff's Ex-
hibit "G," being the certificate of Mr. McCoy during the month

NATIONAL BANK OF COMMERCE. 87

of April, 1908, consisting of two separate parts, the substance
of which has been referred to in the previous questions.
MR. McCOKD : I have no objection to those two.
THE COURT : They may go in.

Certificate referred to admitted in evidence and marked
Plaintiff's Exhibit "G."'

Q You testified a while ago that iluring this period covered
by the fraudulent checks, you were doing some work, is that
true?

A Yes sir.

Q That is on different surveys?
A Yes sir.

Q You also testified that you had paid these men money,
did you employ the cash which you received on your own
checks?

A Yes sir, I paid them in cash.

Q You testified further that you thought that the cash
might have been from the proceeds of these fraudulent checks?
A Possibly, I mean, that is all.

Q, Is it not true, as shown by the statement in Exhibit
"G," which I have just shown you, that you had also received
other money which you were not entitled to and which you
didn't earn which is not covered by these checks?
A Yes sir.

Q When you say that possibly some real services may
have been paid out of these fraudulent checks, you don't know
whether it is true or not?

A Yes sir, I know it was true.
Q How much was there of it?
A Well I am unable to tell how much.
Q How can you tell that it was not paid out of these
fraudulent checks?

A I cannot tell that it was out of these fraudulent checks,
but it was out of my money.

Q You cannot tell that it was not paid out of these frau-
dulent checks?

88 UNITED STATES OF AMERICA VS,

A No sir, I paid it out of money that I obtained ^vliether
it was from my salary, per diem or from these I cannot say.

Q Do you recall, Mr. McCoy, how the expenses covered
by these vouchers, for April, 1908, were paid to these fictitious
persons named in there — To refresh your recollection, I will
call your attention to the month of April, 1908, as to the
fraudulent checks in this case do you recollect how they were
paid ?

A That was done prior to my appointment as Special Dis-
bursing Agent.

Q In 1908, this is in April and the appointment was —

A I don't understand why this — During part of this year
I was addressed as special agent of the General Land Office,
and I acted as special agent under instructions from the com-
missioner of the General Land Office, and during that time I
was examining applications for surveys for different people
around there over the different states in which I traveled and
during that time I was acting as special agent and not as
disbursing agent, and this month covers both, where I was
acting as special agent and also as examiner of surveys.

Q How about May, 1908?

A Yes sir.

Q How about March, 1908?

A Yes sir, the same way.

Q I will call your attention to the itemized report for
March, 1908, that is your signature M. P. McCo}', Examiner
of Surveys?

A Yes sir.

Q Disbursements as shown by within itemized statement
and vouchers, one hundred and seventy-five dollars and twenty
cents, that is the amount of the items set forth on the inside
pages, is it not?

A Yes sir.

MR. McCORD: I object to that. Your Honor, as irrele-
vant, incompetent and immaterial and not the best evidence.
The document itself Y^our Honor ruled out

NATIONAL BANK OF COMMERCE. 89

MR. McLAREX: I beg pardon.

MR. McCORD : It is the contents of an instrument that
the court has already ruled vrould not be admitted.
THE COURT : I sustain the objection.
MR. McLaren : Exception.
THE COURT : Exception allowed.

Q Is it not true, Mr. McCoy, that all of the actual ser-
vices which you did incur, during the period covered by the
fraudulent checks, vrere as a matter of fact itemized in your
various reports, sent in and paid by the Government's money,
either to you or to the persons whom you had hired by checks
outside of these fraudulent checks which you have before 3^ou?
A Yes sir.

Q Then it could not be possible, if this is correct, that you
paid for any of the actual services rendered out of the frau-
dulent checks, that would not be possible?

A It is possible in this way, that I had money obtained
by fraud and also money obtained legitimately —

Q Is it not also true that all the money that you obtained
legitimately would be paid through vouchers and checks other
than these fraudulent ones?
A No sir.

Q Then why did you send in such a voucher as is shown
on March, 1908, and also in April, 1908?

A That is when I was acting as special agent for the
General Land Office.

Q Not disbursing any?

A I was not disbursing anything, but I was paying my
railroad expenses and hotel bills.

Q During these two months is it not true that you put in
accounts for King and Clark —

A That was during the latter part of the month, April
when I was acting as examiner of surveys.

Q I believe that you testified that you signed all of these
vouchers and reports shown in Exhibit B, as M. P. McCoy,
Examiner of Survevs?

90 UNITED STATES OF AMERICA VS.

A Yes sir.

Q Mr. McCoy in reference to your field notes, which you
say were faked, during the time that you were not actually
doing the work, as I understand your testimony in answer
to Mr. McCord, you modified the field notes of the Surveyor
General so as to give them the appearance of being genuine?

A Yes sir.

RE-CROSS EXAMINATION

By Mr. McCORD :

Q You say that these vouchers which you refer to, Exhibit
"G," covering the months of March and April, 1908, that then
you were acting as special agent for the land department?

A During part of the time.

Q And in that case you rendered an account of the work
you did and received the money for it, did you?

A That is the way I remember it.

Q Well now then, how long did you act as special agent
of the department approximately?

A Well during each spring, for a month or two.

Q So that in 1908 and 1909 you were also acting as spe-
cial agent?

A Yes sir. No excuse me, in 1909 I am under the im-
pression that I did not act as special agent.

Q During this whole time you draw two hundred and
seventy dollars a month, you were busy with government work
all the time yourself?

A Yes sir.

Q Do you consider that you earned the two hundred and
seventy dollars a month, yourself?

A No sir. I didn't when I was acting as special agent.

Q Part of the time you say you were — you had men em-
ployed doing legitimate work making surveys during the time
that you were entitled to your salary?

A Yes sir.

Q On most of them covering this early period, you yourself

NATIONAL BANK OF COMMERCE. 91

were engaged, were you not in tending to tlie work you were
having done, you said that you had quite a considerable work
done in examining surveys and running lines and you were
employed by the Government and you were receiving money
from the Government at that time, were you not?

A Yes sir.

Q So that during most of your time you would consider
that you were fairly entitled to the money that you drew, two
hundred and seventy dollars per month?

A No sir, not during the last two years, I didn't consider
that I did.

Q They paid you your salary?

A Yes sir.

Q They never objected to paying it at any time, they never
raised any question about paying you?

A Yes sir, small ones.

Q They never sued you to recover it back?

A Not that I am aware of.

Q How long a time, Mr. McCoy, did you spend in the
penetentiary at McNieFs Island?

A A year and a half.

Q How long were you sentenced for?

A Three years.

Q You were paroled after about a year and a half?

A Yes sir.

RE-DIRECT EXAMINATION

By MR. MCLAREN:

Q You have just testified, Mr. McCoy, that you received
your salary during all of that period and that the Govern-
ment didn't protest the payment of your salary — I presume
that you refer to your monthly vouchers which are shown in
Plaintiff's Exhibit "B"?

A Yes sir.

Q And which you have certified as being correct?

A Y'es sir.

92 UNITED STATES OF AMERICA VS.

Q On these vouchers is the alleged residence of the ficti-
tious persons in each case, the place where they were supposed
to have been living at that time?

A Yes sir.

Q You didn't do any work during the summer of 1909?

A No sir.

Q Did you ever do any work —

A Except early in the spring.

Q Can you tell approximately how many months pay you
had rendered services for during the period covered by the
vouchers you sent in — I don't mean exactly but somewhere
nearly?

A No sir, I could not tell you that.

Q Can you tell by consulting the names and addresses,
Mr. McCoy?

A No sir, the only way I could tell it would be by having
a list of the surveys, but I could not tell it from any informa-
tion that I have here.

Q Could you tell from the Great Falls, Montana—

A I was there mostly as special agent.

Q During the period covered by these checks, however?

A Yes sir.

Q There were no checks between January, 1908, and May,
1908, during the spring while you were examining these surveys
and not disbursing any?

A No sir.

MR. McLaren : In view of the cross-examination devel-
oped by Mr. McCord, I now renew my offer in evidence of Ex-
hibit "B," being the vouchers that were sent in by the witness
and concerning which Mr. McCord examined the witness freely
upon cross-examination.

MR. McCORDi: I object to it as incompetent, irrelevant
and immaterial.

THE COURT : I sustain the objection.

W. G. GOOD, called as a witness on behalf of the
plaintiff, being first duly sworn, testified as follows:

NATIONAL BANK OF COMMERCE. 93

DIRECT EXAMINATION

By Mr. McLAREN :

Q AYill you state your name to the Clerk, Mr. Good?

A W. G. Good.

Q W. G. Good; G-o-o-d?

A Yes sir.

Q What is your position with the government service, Mr.

Good?

A Special agent of the General Land Office.

Q How long have you held that position?

A A little over seven years.

Q How long have you been in the government service all

told, Mr. Good?

A Seven years.

Q Approximately?

A Seven years the first of February.

Q Were you in that position in the summer and fall of
1909?

A I was.

Q Are you familiar with the method and custom of the
department at that time as to checking up the surveys of public
lands that had been made by contract? If you are not, say so,

and I will —

A Wouldn't say that I am familiar with checking up sur-
veys.

Q No, I mean the method.

A Yes sir, in a vray, yes sir.

Q Will you explain to the jury, Mr. Good, how the gov-
ernment has its public lands surveyed in the State of Wash-
ington and adjoining states and then how those surveys are
checked up, if in any way.

MR. McCORD : Are you a surveyor? Have you ever been
in the land department as a surveyor?

THE WITNESS : No sir, I am not a surveyor.

MR. McCORD: I don't think the witness is qualified to
testify.

94 UNITED STATES OF AMERICA VS.

MR. MCLAREN : I will qualify liim.

Q Are you familiar, Mr. Good, with the method and prac-
tice of the department in making its surveys and checking
them up?

A Well, I am familiar with the method of letting con-
tracts and the way they are checked up by the examiner of
surveys, and so forth.

Q That is what I mean.

A Yes sir, I know how that procedure is gone through with.

Q Now, will you explain that procedure to the jury?

MR. McCORD : I object. The witness has not shown him-
self to have qualifications at all.

THE COURT : I will overrule the objection.

MR. McCORD : I object as incompetent, irrelevant and
immaterial.

Q Proceed Mr. Good.

THE COURT : Well, I don't know how material it is in
this case to go into that.

MR. McLaren : I win withdraw that question for the
present, then, if the Court please.

Q Now, refreshing your recollection, Mr. Good, do you
recollect anything about the transactions of one M. P. McCoy
during the summer of 1909 while he was acting as special dis-
bursing agent.

A I do, yes sir,

Q State whether or not you made any investigation of
charges of irregularities against him in his work with the gov-
ernment ?

A I did.

Q What were those investigations, Mr. Good?

A Why, I investigated his — I tried to investigate his work
on the Colville Reservation here in 1909, the summer of 1909;
also some work that he did in Montana in 1908 on different
surveys that he was supposed to be checking up.

Q To refresh your memory, Mr. Good, I Avill ask you to
examine some of these checks which are marked Plaintiff's Ex-

NATIONAL BANK OF COMMERCE. 95

hibit "A'' and state whether or not you made any inyestiga-
tions to determine whether the payees in those checks or the
names as shown as payees in those checks were fictitious or
otherwise?

MR. McCORD : I object to that as incompetent, irrelevant
and immaterial.

MR. McLaren : I expect to prove by this witness that
these persons were fictitious persons, the names were fictitious.

THE COURT : The objection is overruled.

Q Did you make such investigation, Mr. Good?

A I did as to the supposed employees working for Mr.
McCoy during the year 1909 and 1908.

Q Was that investigation made at the places where these
parties' residences were supposed to be?

MR. McCORD : I object to that as leading, irrelevant, in-
competent and immaterial.

MR. McLaren : I will change the form of question, Mr.
McCord. It doesn't make any difference.

MR. McCORD : I don't care about the leading part of it.
I object to it as incompetent, irrelevant and immaterial.

Q Did you find any such person as J. D. King?

A I did not.

MR. McCORD : Ask him where he examined or something
of that kind. Such a question without stating where is too
indefinite.

THE COURT : Well, he can't tell it all at once. He has
got to have a beginning somewhere. I overrule the objection.

MR. McCORD: Exception.

THE WITNESS: In the first place I called for the —
on the Commissioner of the General Land Office for Mr. Mc-
Coy's monthly and quarterly statements of his accounts to
ascertain the name —

MR. McCORD : What is that?

THE WITNESS: To ascertain the names of the people
that he was supposed to have working for him.

MR. McCORD: I move to strike out that. Your Honor,

96 UNITED STATES OF AMERICA VS.

as not tlie best evidence. He gathered certain information
from certain public records in Washington.

ME. McLAEEN : That is simply preliminary and leading
up to the investigation.

THE COUET : Objection overruled. Motion to strike out
denied.

ME. McCOED : Exception.

Q Proceed, Mr. Good.

A And those statements, those quarterly statements, also
vouchers, set out the different men that he was supposed to
have had working for him.

ME. McCOED: I move to strike out. Your Honor, from
the witness' testimony the statement as to what certain public
records in Washington showed as not the best evidence.

ME. McLAEEN: I have offered those same vouchers and
counsel objected to them. I don't think it lies now in him to
object as secondary evidence.

ME. McCOED : It is not secondary evidence.

THE COUET: The motion to strike out is denied. The
objection is overruled.

ME. McCOED : The Court will allow me an exception.

THE COUET : Exception allowed.

Q Proceed, IVIr. Good.

A And to secure the addresses of the different employees
and in that way I had some grounds to work on to look up
these people. This man King was supposed to be from Great
Falls.

ME. McCOED: I move to strike out that. Your Honor,
where he was supposed to be from, as wholly immaterial, ir-
relevant and incompetent.

THE COUET: You need not repeat that every time. I
will let you have a bill of exceptions and have it all in. I am
going to let him testify about his whole investigation.

ME. McCOED: Understand I have an exception to all.
I don't desire to impede the progress of the trial.

THE COUET : You may have your exception.

NATIONAL BANK OF COMMERCE. 97

Q Go ahead, Mr. Good.

A Well, I found out the addresses of these different em-
ploj^ees and the names of the employees as set out in Mr. Mc-
Coy's vouchers and checks and so forth, and I went to the dif-
ferent places where these different addresses were given to try
to locate these different emplo^'Ces, different places in Mon-
tana, Great Falls, Benton, Culbertson, and Glasgow, I made
a thorough search for these different employees and was unable
to find any such men as set out in his accounts and his state-
ment of expenditures and also as to the checks that were issued
in payment for services and labor.

A JUROR: Will you speak a little louder.

MR. McLaren : The juror didn't get the last part of
your answer. Will you repeat the last portion of your answer,
that you didn't find any of the persons named?

A Yes sir, as set out in checks and vouchers that he ren-
dered a statement — he rendered a statement every month of
his expenditures and he set out in all those monthly statements
the employees that he had under him and for supplies and so
forth that he purchased during that month, that is where I
ascertained the names of tke different employees and amount
of supplies that he bought from different concerns, got the full
statement of the Commissioner of the General Land Office as
to his expenditures for each and every month.

Q As a result of that investigation did you find all of those
persons named as payees in the checks. Exhibit "A," were real
or fictitious persons?

A I was unable to locate a single one.

Q You examined in each case, did you, the locality where
they were supposed to have been employed?

A I did for the years 1908 and 1909.

Q About what length of time did your investigation con-
sume, Mr. Good?

A About six weeks all told.

98 UNITED STATES OF AMERICA VS.

CROSS-EXAMINATION

By MR. McCORD:

Q Have you gone through all of these checks in Exhibit
"A" recently?

A I have not, no sir.

Q You don't know whether those are the checks that you
were investigating five or six years ago or not, do you?

A When I was here in September or August, 1909, I se-
cured from the National Bank of Commerce quite a bunch of
checks that they had on hand that they had not transmitted
to the commissioner of the General Land Office, to the treasury
department at that time, they were the only checks that I ever
saw in connection with Mr. McCoy's account; the others had
been sent to Washington.

Q Do you know what checks you ever saw; are those the
checks; are you able to tell which ones you got from the Na-
tional Bank of Commerce here in September, 1909?

A Well, I had all the checks that were cashed, and if I
remember right, for July and August at that time.

Q July and August at that time?

A Yes sir, the bank turned them over to me and I had
them in my possession for several days,

Q Now, all these checks that have been introduced here
and what is known as Exhibit "A," covering this entire length
of time, did you ever go over these checks and examine them?

A Not today, no sir.

Q What?

A Not today, no.

Q Well, when did you examine them?

A I have not examined any of these checks ; I haven't seen
them before until I just came in here except if any checks are
included here that I saw while I was here in 1909.

Q As a matter of fact the only checks that you have ever
seen in this McCoy transaction were the few checks in the
months of July and August, 1909, that you got from the
National Bank of Commerce?

NATIONAL BANK OF COMMERCE. 99

A That is all, yes sir, at that time.

Q Now, as a matter of fact you only got the checks for the
last month in 1909, did you not?

A I think it covered July and August, I think they made
a quarterly return to the —

Q As a matter of fact don't you know that they make a
return or did make a return monthly and did send in the checks
monthly?

A They might have; however, since you brought the mat-
ter up they didn't make a return at that time for July and I
got the checks for Julv and August, for two months at that
time.

Q You never examined any other checks except those?

A No, I wasn't in a position to ; they were in Washington.

Q And you never examined them in Washington either,
did you?

A No sir.

Q You never saw them?

A No sir.

Q And whether or not the checks referred to, the fictitious
people referred to in these checks were the ones that you ex-
amined over in Montana or not you don't know?

A No.

Q Except that they are similar names?

A I never saw the checks before.

Q You don't remember those names. King and all that
bunch of twenty-five or thirty names, do you ?

A Well, going through here I could recall these names,
checking up my work that I went through a year and a half ago
or two years ago.

Q Take the examination of the surveys in Montana where
the men were supposed to be employed, the parties living, some
of them at Glasgow you said?

A Yes sir.

Q What sort of an investigation did you make?

100 UNITED STATES OF AMERICA VS.

A Well, as I said I secured from the office in Washington
his original —

Q I understand you got the names in Washington?
A Got his original vouchers and his —
Q Got the names and the purported addresses and you
went out to investigate. What did you find?

A I had the original pay-rolls signed by these different
parties and also the vouchers that I secured, were sent to me.
Q What I want to get at is what investigation did you
make. Did you go to Great Falls and investigate there?
A Tried to locate these parties, yes sir.
Q What sort of an investigation did you make? How
extensive? What did you do?

A Well, I went to Great Falls for instance.
Q Well, I want to know what you —

A Ascertained from the postmaster, directory, any way
possible to locate a certain man that I was after that was
supposed to live at Great Falls. For instance I went to the
County Surveyor's office, took it for granted that tliese men
were surveyors, to ascertain whether there was such a sur-
veyor living in that part of the country.
Q You didn't find any of them?
A Couldn't locate a single man.

Q And as a matter of fact after you made that investiga-
tion as to one or two men you reached the conclusion that they
were all forgeries, didn't you?
A I beg your pardon?

Q Did you run down each man in the same way?
A I did.

Q I will ask you if it was upon your investigation that
the government reached the conclusion that this particular
package of checks, aggregating |15,000, were fraudulent?

A Why, I made a report on the case and also what I gath-
ered from the man that wrote the checks, Mr. McCoy admitted
they were all forgeries to me.

NATIONAL BANK OF COMMERCE. 101

Q In other words, your report \Yas based on what Mr.
McCoy told you and your investigation in a cursory way?

A And what I lieard in court in Tacoma when he was
found guilty.

Q Y\lien you found Mr. McCoy was guilty of perpetrating
frauds you didn't spend very much time in tracing it down,
did you?

A It was not necessary.

Q That is what I say.

A He admitted everj'thing.

Q You knew the man was guilty, he admitted he was
guilty, he admitted that he had robbed the government and
proved unfaithful to his trust and you were not busy in making
any further investigations, were you?

A No after that.

Q And as a matter of fact the list of checks made up there
noAV is based entirely upon the testimony of Mr. McCoy, isn't
it, that is except for probably the months of July and August,
1909?

A Why, I am sure I don't know ; I don't quite understand
what 3^ou are trying to get at.

Q What I am trying to get at is this: I say in determin-
ing the fraudulent checks that had been issued the government
acted upon your report you say and you acted on Mr. McCoy's
statement, didn't you, for the most part?

A To a certain extent, yes; I couldn't ascertain who these
men were and he admitted that there weren't such men and
the checks were all fraudulent and —

Q And when he admitted that, you were ready to assume
that it was all true, weren't you?

A Weil, as far as the investigation that I made, I found
out that to be a fact.

Q Well, you made the investigation before you had him
arrested?

A I did, yes sir.

Q But you didn't make it covering his entire work for the

102 UNITED STATES OF AMERICA VS.

two or three years; you only had him indicted or had him
charged with the embezzlement of a few sums, did you not?

A He was indicted here for depredations that took place
here in Washington, yes.

Q I understand that, but it was only one particular item,
wasn't it, or two?

ME. McLaren : That is objected to as not calling for
the best evidence.

Q I ask if you know.

A Covering his shortages here for the past year, that is
what he was indicted for here.

Q You have not seen the indictment yourself, have you?

A I did see it.

Q You don't remember that?

A No.

Q You couldn't tell. That would not be the best evi-
dence.

A That is a matter of record.

Q What I am getting at is this : when you went over into
northern Montana, you were the felloAV that got onto his scheme,
weren't you, Mr. Good?

A Yes sir,

Q A couple of men up in northern Montana somewhere
got into a row over a homestead and you went up there as
special agent to investigate it, didn't you?

A No, I beg your pardon.

THE COURT: It is now time to adjourn. We will ad-
journ until tomorrow morning at ten o'clock. Gentlemen of
the jury, until that time you will be permitted to separate.
You are instructed that while you are out of court you must
not talk about this case or any subject matter connected with
it. You will not discuss it between yourselves or any one or
listen to what anybod}^ may say about the case out of court.
You are also especially instructed to have no coversation on

NATIONAL BANK OF COMMERCE. 103

any subject whatever either with the witnesses or attorneys or
parties interested.

{Further proceedings continued until 10 o'clock A. M.,
March 13, 1912.)

March 13, 1912, 10 o'clock A. M.

All present and the jury in the box.
Proceedings continued as follows:
W. G. GOOD, on the stand.

CROSS-EXAMINATION (Resumed)

By MR. McCORD :

Q Mr. Good, you stated that you made certain investiga-
tions over in Montana as to the reality of these various payees
named in the checks; did you make any investigation in any
other state as to those that were issued fraudulently, covering
surveys, purported surveys, in the state of Washington or the
state of Idaho?

A I only took up those in Montana and the ones here he
was supposed to have been working on at the time that he was
arrested.

RE-DIRECT EXAMINATION

By MR. MCLAREN :

Q Mr. Good, you say you investigated his reports at Col-
ville on the Colville Reservation where he was supposed to be
working at the time he was arrested?

A Yes sir.

Q Where was Mr. McCoy staying at the time he was sup-
posed to be working at Colville?

A Right here in this city.

Q How long had he been staying here?

A All that summer.

Q The summer of 1909?

A Yes sir.

Q Now, you testified on cross-examination of Mr. McCord,

104 UNITED STATES OF AMERICA VS.

that you made an examination over in Montana and then later
interviewed Mr. McCoy himself in Seattle. I want to ask you,
Mr. Good, if you made an investigation regarding Mr. McCoy's
work and reports at Great Falls, Montana?

A I did so far as trying to locate the employees that he
was supposed to have working for him.

Q Did you make an investigation there to find J. D. King?

A I did; I think his address was Great Falls.

Q Did you find him?

A No sir.

Q Did you find F. M. Clark?

A I did not.

Q A. J. Whitney

A I did not.

Q D. H. Sullivan?

A I did not.

Q S. F. Cady?

A I did not.

Q All of those names were supposed to be the names of
employees at or near Great Falls, were they not?

A Their postoffice address was given as Great Falls.

Q On the voucher that you spoke about?

A Yes sir.

Q Now, did you make a similar investigation at Culbert-
son, Montana?

A I did as to two or three parties there.

Q You mean as to the parties supposed to be employed
at that place?

A Yes sir.

Q Did 3''ou find there any George D. Cook?

A I did not.

Q Or F. M. McCulley?

A I did not.

Q Did you make a similar investigation at Benton or Fort
Benton, Montana?

A I did as to one man I think there.

NATIONAL EANK OF COMMERCE. 105

Q What mau was that? To refresh your memory was
that H. M. Benson?

A That is the name, yes sir.

Q Did you find H. M. Benson?

A I did not.

Q What effort did you make to tind any such person?

A I made every effort possible to locate a man in a place
of that kind by making inquiries from business men, the post-
master and so forth, men that have lived there for years that
I knew of and supposed to know every one in the community,
made a diligent search.

Q Now, at the Colville Keservation in the State of Wash-
ington, Mr. Good, you say you made an investigation of Mr.
McCoy's supposed work and employees?

A I did.

Q Did you investigate to learn whether one A. C. Jenkins
was a real or fictitious person at Colville or near there?

A I did.

Q Did you find any such person as A. C. Jenkins?

A I couldn't locate him at all.

Q You used the same methods of investigation there as
you have described already?

A Yes sir.

Q What did you find as the result of these investigations
as to whether or not Mr. McCoy himself had been on these
public surveys doing the work that was indicated in his reports?

A I couldn't learn that he had been on the ground himself
at all.

Q You couldn't learn that he had been on the ground
at all?

A No sir.

Q And it was after making an investigation, as you have
just testified to that you then came over and interviewed Mr.
McCoy himself?

A Yes sir; all my evidence was negative, I couldn't locate
a single man that was supposed to be employed by Mr. McCoy,

106 UNITED STATES OF AMERICA VS.

I couldn't learn where he had been on the ground himself and
I simply had to confront Mr. McCoy in relation to it.

(Witness excused.)

MR. McCORD : I will have an opportunity, Your Honor,
as I understand the stipulation, including the Court, to file
an exception and have a bill of exceptions to all of this testi-
mony or such parts of it as I want in the bill of exceptions.

THE COURT : I will allow that.

MR. McLaren : I offer in evidence as Plaintiff's Exhibit
"H" a copy of the indictment in the case of the United States
of America vs. M. P. McCoy, returned by the Grand Jury on the
July term of 1909.

MR. McCORD : September 17th.

MR. McLAREN : Returned September 17th, 1909, to which
the defendant pleaded guilty on the 28th of September. There
is no objection by counsel.

THE COURT: It will be admitted.

Copy of indictment referred to admitted in evidence and
marked Plaintiff's Exhibit "H"'.

MR. McLAREN : I offer in evidence as Plaintiff's Exhibit
"I", certified copy —

(Paper handed to counsel for defendant.)

MR. McCORD : I object to the offer on the ground that it
is irrelevant, incompetent and immaterial.

I further object to it. Your Honor, upon the ground that
the purported letter, directed to the cashier of the National
Bank of Commerce, of Seattle, Washington, dated February
7th, 1903, purports to carry with it certain instructions and a
circular containing the regulations issued by the treasury de-
partment under date of December 7tli, 1906. It shows upon its
face that the letter appointing the National Bank of Commerce
a United States depository is dated February 7th, 1903. Now,
they attach to the letter dated February 7th, 1903, a list of
regulations dated December 7th, 1906, made three years after
the letter, which purports to carry with it the transmission of
the departmental regulations. I object to it upon the further

NATIONAL BANK OF COMMERCE. 107

ground that in 1903 the National Bank of Commerce, while
there was a National Bank of Commerce in existence at that
time, in 1906 the National Bank of Commerce that was then in
existence went out of business by a consolidation with the
Washington National Bank under the name of the National
Bank of Commerce, so that this letter is objectionable for the
two reasons: First, that there ought not to be permitted to
go to this jury any departmental regulations bearing date
after the letter of transmission establishing the depository,
unless it is shown that they were sent after they were printed.
There is no presumption that because a United States deposi-
tory was created in 1903 regulations bearing date three or four
years later Avere ever mailed to them; and besides, as I say,
the National Bank of Commerce, to whom this letter was ad-
dressed, happens to have the same name that the present Na-
tional Bank of Commerce has, but the date of the organization
of this bank is of a later date, established in 1906, and the
burden is on the plaintiff to prove that the bank that was es-
tablished in 1906, or the one that they are suing, when it was
established. I object to it as irrelevant, incompetent and im-
material, not the best evidence, hearsay, and wholly immaterial
to any of the issues in this case, and extremely prejudicial to
the defendant in this action if permitted to be introduced in
evidence.

MR. McLaren : if the Court please, the fact that the
original National Bank of Commerce may have seen fit to con-
solidate itself with some other bank, but preserved the same
name, admitting, as counsel says, that it was a national bank
throughout that period, including the period of this letter,
ought not to have any bearing upon the admissibility of this
letter. It might be possibly a defense, but those facts are not
in evidence yet if they are admissible at all. Now, as regards
the circulars which are attached to this letter, it is true there
does appear a discrepancy in the date, the letter bearing date,
February 7th, 1903, and the circular, December 7th, 1906.
These circulars do, ho^vever, cite that they are intended to in-

108 UNITED STATES OF AMERICA VS.

elude the previous circulars of 1897 and April ITtii, 1899, re-
spectively. Does the Court wish to examine the letters?

THE COUET: Yes.
(Papers handed to the Court.)

THE COURT : To introduce this circular you will have to
have some proof that it was received or at least transmitted
to the bank.

MR. McCORD: I add to my objection, furthermore, that
there is no proof of the mailing of the letter.

MR. McLaren : I would like to make the further sug-
gestion, Your Honor, that public regulations of the department,
such as those, would be taken judicial notice of in any event
as being a departmental regulation issued under the executive
authority of the departments of government.

MR. McCORD : That doesn't make law. It is not binding
on the defendant in a case like this.

( Further Discussion. )

THE COURT: The Court is required to take judicial
notice of regulations made by the departments of the Govern-
ment authorized by law, and so far as those regulations con-
form to the law and are not contrarj^ to the law and do not in-
vade rights that exist under the law, they are valid regulations
and have the force of law. It may be in determining the law
of this case that the Court will have to consider the question
whether there is anything in these regulations that are not
binding by reason of attempted exercise of unauthorized power
or deprivation of legal rights. Under the statute public funds
are required to be kept on deposit with the treasurer of the
United States or an assistant treasurer, but in places where
there is no treasurer or assistant treasurer, the secretary of
the treasury may, when he deems it essential to the public in-
terest, specially authorize in writing the deposit of any public
money in any other public depository or in writing authorize
the same to be kept in any other manner and under such rules
and regulations as he may deem effectual to facilitate pay-
ments to public creditors. That is a part of the statute, Sec-

NATIONAL EANK OF COMMERCE. 109

tion 3620, of the United States Revised Statutes. This de-
fendant is not the treasurer or an assistant treasurer and could
only receive and hold and disburse public money by virtue of
this last clause of Section 3620, and would be bound to observe
the lawful regulations made by the Secretary of the Treasury.
MR. jIcCORD : If it has the force and effect of law, Your
Honor, then it is not admissible in evidence, but it is the duty
of the Court to instruct the jury what the law is, treating that
as a part of the law. I object to the entry on that additional
ground, that the Court will not send to the jury statutes of
lav.-, but tell tlie jury what the law is when the case is sub-
mitted. A certified copy of the statute is not admissible in
evidence. It is for the Court.

MR. McLaren : I make this suggestion upon that point :
That the sending of that certified copy of the regulations could
not be of any prejudice to either party. On the other hand,
a failure to do so might result, if counsel's first position is cor-
rect, in an error in the record in the trial of this case. I think
it would obviate a possible mistrial if it is permitted to go in.
THE COURT: I consider these circulars as matters for
the information of the Court only. You may read into the
record the letter dated February Tth, 1903, and this paper will
not be submitted to the jury as an exhibit in the case. Simply
that letter may be read in.

MR. McCORD: I object to that. Your Honor, because
there is nothing in the certificate to show that the letter was
ever mailed. I don't know that the government stands in any
better position than an individual. Proof of the mailing of the
letter would be necessary by somebody.

THE COURT : I will overrule the objection.

MR. McCORD: My objection goes to the ruling of the
Court on the question of these departmental regulations.

THE COURT: Yes.

MR. McCORD: That is all of the objections that I have
made goes to the whole matter, Your Honor.

THE COURT: Exception allowed.

110 UNITED STATES OF AMERICA VS.

MK. McLAEEN : I wish to read noAv to the jury the letter
from the treasury department of Washington dated February
7th, 1903: "Cashier, National Bank of Commerce, Seattle,
Washington. Sir: In compliance with the wish, orally ex-
pressed by Mr. H. C. Wallace, a director, the National Bank
of Commerce of Seattle, Washington, now a depositary of public
moneys for temporarj^ service, is herebj' made a depositarj' for
regular purposes, except receipts and customs, and specially
designated under the provisions of Section 3620, Revised
Statutes of the United States, for the reception, safe keeping
and disbursement, according to law, of the funds advanced
to disbursing officers of the Department of the Interior. The
receiver of public moneys at North Yakima and Waterville,
Washington, have been instructed to deposit their receipts and
keep their disbursing accounts with your bank. The additional
blanks which will be needed by you on account of this designa-
tion have been sent to you and your attention is invited to the
instructions printed thereon as well as to the circular
instructions herewith enclosed. Your bank is hereby author-
ized to hold a fixed balance equal to the par value of its secured
bonds, viz., |300,000, and you will remit to an assistant treas-
urer of the United States each day from the balance standing
to the credit of the Treasurer of the United States for deposit
on account of 'Transfer of Funds' a sufficient sum to reduce
your total balance to said amount of |300,000. Eespectfully,
L. M. Shaw, Secretary." And attached to it is the seal of the
Department.

I now offer in evidence as Plaintiff's Exhibit "J" certified
copies of certain letters of instruction from the Department
of the Interior, General Land Office, Washington, to M. P.
McCoy, Examiner, having particular reference to the page that
I have turned down in the margin.

MR. McCORD : I object to the offer as irrelevant, incompe-
tent and immaterial; on the further ground that there is no
proof that the copies of the letters purporting to be offered here
were ever mailed to Mr. McCoy as examiner, and so far as this

NATIONAL BANK OF COMMERCE. Ill

controversy is concerned between the Government and the de-
fendant hank, any communications or any letters passing be-
tween the Government and Mr. McCoy would be purely hearsay
and outside of the record, and not the best evidence.

MR. McLaren : The Court will recollect that the deposi-
tion of Mr. McCoy showed that he had burned and destroyed
ail of his letters of instruction, and upon an attempt being
made to have him testify in substance what they were, this very
objection was made, that the flies in Washington would be the
next best evidence. I now offer this in evidence particularly,
and only the part that I have turned down in the margin for
this purpose, if I may be permitted to state the substance of
that: That the testimony shows that during the summer of
1909 Mr. McCoy was stationed here at Seattle all the time, al-
though he was supposed to be engaged in the examination of
the public land surveys in the eastern part of this state, and
also in Montana, and the letter which I am now offering in
evidence is his authority not only to go over there, but to trans-
port his assistants over there to those points. The vouchers
which I offered in evidence contain the expense accounts of
these two fictitious assistants whom he did transport according
to his vouchers, and for which he did get pay from Seattle over
into the eastern part of this state, and I guess over in Montana
as well. This is the very evidence that counsel said yesterday
was the best evidence. I now offer it.

THE COURT: The obligation of this defendant was to
receive, safely keep and disburse public money according to
law and regulations. The bank was not required to exercise
supervision over the disbursing officers or to insure the Govern-
ment against embezzlement or loss of funds by misappropria-
tion or for expending the money for improper purposes. The
duty of the bank was to pay the checks that were properly
drawn by an authorized person, a person authorized to draw
them, and pay the money to the payees or to the order of the
payees's name in the check. The bank could not know and was
not required to know, whether the payments were proper pay-

112 UNITED STATES OF AMERICA VS.

ments. It had to know that the payments were made as
authorized by the checks. I think you are loading this case
up with unnecessary matter in endeavoring to prove that these
payments were fraudulent to the extent of being drawn for
sendees that were not rendered or supplies that were not
furnished. The bank did not have to inquire about them and
was not in a position to know. The bank was in a position to
know that the payees who presented the checks or got the
money or indorsed them were properly identified.

ME. McLaren : I call the Court's attention to the fact
that one of the defenses set up was that the Government did
receive value received for these checks, although they were
fraudulently issued.

THE COURT : AVell, when you reach that the Court will
have to rule on it, but in making your case in chief you are
not required to anticipate that defense. I will sustain the
objection on the ground that this document is irrelevant. It
is not a necessary part of the proof that the Government is
required to introduce. I think it is the defendant's case in
chief.

MR. McLaren : Allow us an exception.

THE COURT: Exception allowed.

MR. McLaren : In order to facilitate matters, if the
Court please, I novr offer to prove by one other witness what
the fixed, settled policy and practice of the Department of the
Interior was as to their method of examining and checking up
the surveys that were made from time to time of the Govern-
ment's public lands. It may be that the Court will rule that
this is anticipating the defense, and if so I make tliis offer in
this waj^; if not I will put my witness on the stand.

THE COURT : I think it is anticipating the defense, and
it is out of order at this time.

MR. McLaren : I simply want to protect myself against
being cut off by rebuttal.

THE COURT: Yes.

MR. McLaren : Plaintiff rests.

NATIONAL BANK OF COMMERCE. 113

PLAINTIFF RESTED

MR. McCORD : I now at this time, Your Honor, move for
a non-suit and dismissal of this action for the reason that the
plaintiff has wholly fafled to establish the allegations of the
complaint and has failed to establish any cause of action that
would be binding upon the defendant, and the condition of the
evidence is such that if a verdict were rendered in favor of the
plaintiff it would be the duty of the Court to set it aside.

(Argument by Mr. McCord. )

THE COURT: I will not decide this motion before two
o'clock. Gentlemen of the jury, you may be at ease until two
o'clock. I am not excluding you from Iiearing this if you want
to hear it, but you may be excused from attendance until two
o'clock if you want to go. The instructions I have given you at
other times of adjournment are to be remembered by you and
to be heeded by you as now repeated.

(The jury retired.^

(Further argument by respective counsel.)

THE COURT : I want to take time to read some of these
authorities ; the case in 214 United States.

(Respective counsel cited authorities to the Court.)

THE COURT: As the matter rests in my mind now, it
seems to me like a difficult point to get over in this case would
be that the checks were not returned. The right to recourse
against the banks through which these checks came to the de-
fendant bank would, according to ordinary banking rules,
depend upon the return of the endorsed paper, and the Gov-
ernment is held to observe the business rules which obtain with
business men in business transactions, and the Government
is not allowed to assert a right while committing a wrong. If
it v.as wrong to withhold these checks, it is not right to make
the defendant bank pa^^

(Recess until two o'clock P. M. same day.

March 13, 1912, 2 o'clock P. M. All present and the jury
in the box. Proceedings continued as follows :

114 UNITED STATES OF AMERICA VS.

THE COURT : I want to see those checks.

(Papers handed to the Court.)

THE COURT: I want the letter of instructions that ac-
companied these circulars that was received this morning.

( Papers handed to the* Court. )

THE COURT: How did the money get into the bank?
Was the mone^^ deposited there to the credit of Mr. McCoy or
did he receive drafts and deposit the drafts?

MR. McLaren : It was sent directly to the bank, Your
Honor.

MR. McCORD: Deposited to the credit of M. P. McCoy
as special examiner, or examiner of surveys and special dis-
bursing agent, I think.

MR. McLAREN : ( Handing papers to the Court. ) Those
are certified copies of the several warrants that were sent to
the bank. They are not introduced in evidence. I neglected
callino- Your Honor's attention to the fact that the checks for
the year 1909, none of them contain in the margin any items
as to the purpose for which they were drawn, which is contrary
to the regulations submitted to you, and which provide that the
bank shall refuse payment of checks unless it complies Avith
that.

THE COURT : How did these checks get into the posses-
sion of the United States?

MR. McLAREN: The custom between the United States
and the bank was this : that after the checks were turned into
the bank and canceled for payment they were sent in to the
Department at Washington every month or every quarter, as
the case might be, I think every quarter, and transmitted along,
with a statement from the bank to the Department, and upon
the representation of those canceled checks and the statements
accompanying them from the bank the settlement was made
from time to time between the Department and the bank. As
to the checks for July and August, 1909, you will recollect
that the witness testified they were still in the possession of
the bank at the time the investigator spoke to the bank oificially

NATIONAL BANK OF COMMERCE. 115

about it when he was making his investigation before Mr.
McCoy was arrested,

THE COURT: All those checks returned or sent to the
accounting department accompanying statements of the ac-
count, they show on their face that they did not comply with
the regulations, not having indorsed or indicated thereon the
purpose for which the check was issued.

MR. McLaren : That is true, Your Honor.

THE COURT: That would be notice to the Government,
if the Government accepted those returns without question or
within a reasonable time, it would preclude the Government,
I think, from denying the right of the bank to pay the check
on that ground for a non-compliance with that regulation. So
far as the government had notice or can be presumed to have
had notice of what the transactions really were, it is like any
other party dealing with commercial paper to observe the laws
that fix and determine the rights and liabilities of the parties in
handling commercial paper. When a depositor receives a state-
ment of his account in the bank, accompanied by checks that
have been paid, and he fails to give notice promptly of any
checks that are spurious or payment improperly made, it be-
comes an account stated, it cuts off any dispute about those
matters after a lapse of a reasonable time to show up errors,
discrepancies.

MR. McLaren : Might I suggest that that doctrine could
not apply to the Government as a depositor, except predicated
upon this theory : That the oversight or neglect of some
subordinate in the department at Washington could have the
effect of nullifying the printed regulations issued by the Secre-
tary of the Treasury?

THE COURT : The case in 214 United States decides one
point, and that is that the rule requiring prompt notice to be
given of the invalidity of commercial paper is an exception
to a general rule, the general rule being that where money is
paid by mutual mistake that the mistake can be corrected and
the matter adjusted according to the rights of the parties.

116 UNITED STATES OF AMERICA VS.

Now the exception tliat is made in the law is where notice of
a mistake is not promptly given and after a lapse of reasonable
time, if no notice is given, the part^^ who has made the mis-
take is protected against bringing up the matter to be
readjusted.

Now, the Supreme Court decided that that exception does
not apply except in those matters where the party who should
give the notice is in a position to have knowledge of the mis-
take. It does not apply as against the Government when
checks are paid on fraudulent indorsement of payees, because
the Government does not know the payees, does not know their
signatures, is not in a position to have the information so as
to give notice of a mistake of that kind ; therefore, the rule does
not apply. The argument to be drawn from that is that, in
accordance with other decisions of the Supreme Court of the
United States, the Government is bound by the business rules
that apply to the handling of commercial paper. As said by
Judge Miller, the Government itself is as much interested, if
not more interested, than anybody else, in the value of con-
fidence in handling commercial paper, and for that reason it
is as much bound as private individuals are to the reasonable
rules of business that are prescribed and followed for the pro-
tection of people who repose confidence in handling com-
mercial paper. The defendant was not obligated to pay any
of these checks except on presentation at its banking house in
Seattle by the payee, and upon being satisfied of his identity,
but in accordance with commercial usage, it acted with reason-
able business prudence in taking these checks, accompanied by
an endorsement which guaranteed or warranted the genuine-
ness of the signature of the payee; I mean taking these checks
from another bank; and having done so it is entitled to be
treated fairh' in the matter of protecting its rightful recourse
against the jjrior indorsers. I think essential to tliat right
was the return of the checks or a tender of them. If I am
not greatly mistaken in my understanding of banking business
and the rules of law, this defendant upon being informed that

NATIONAL BANK OF COMMERCE. Ill

the payees named in these checks were fictitious persons, and
the endorsements of their names on the checks were forgeries,
and that the checks were in the custody of the United States
District Attorney, and that permission would be given to in-
spect them and take copies therefrom, would not on receipt
of that notice or that kind of information have any legal ground
to go to another bank from which the check had been received
with guarantee and say, "Here, that guarantee of yours has
caused me to lose money and I require you to pay back the
money that I paid on this check" ; I don't believe the defendant
bank could go to another bank and make a demand of that
kind on that kind of showing or that state of facts. It would
have the right to take the check and throw it down on the
counter and require the mone}^ to be refunded on it. I will
grant the motion for a non-suit.

ME. McLaren : just a moment, if the Court please.
The state of facts which Your Honor suggests I think would
not be applicable to the checks for the months of July and
August, the last two months issue of the checks, for the reason
that as testified to by Inspector Good, those checks were still
in the possession of the National Bank of Commerce at the
time he made his investigation, and at that time he told the
bank the facts and the transactions relative to ]Mr. ]McCoy.

ME. McCOED: He did not so testify. He said he went
there and asked for the checks and they were given to him hj
the bank.

ME. McLAEEN : Yes, for the months of July and August.

ME. McCOED: And then they were forwarded on to
Washington.

THE COUET: Did he take them up?

ME. McLAEEN: No, he didn't.

ME. McCOED : They were forwarded to Washington, just
the same as the other checks.

THE COUET : They were forwarded before any—

ME. McCOED : Before any demand was made, according
to the evidence, on the 5th of March.

118 UNITED STATES OF AMERICA VS.

THE COURT : Thev were in the possession of the Govern-
ment when this suit was commenced?

MR. McCORD: Yes.

MR. McLAREX: Yes, they were when the suit v^'as com-
menced, but they were in the possession of the bank when the
McCoy transactions were first brought to their attention by
the investigation of Mr. Good. This point was not suggested
on demurrer to the complaint, and I would therefore ask the
permission of the Court to reopen the case for this purpose and
for this purpose only. I would like to have it reopened for
the purpose of offering to prove that Mr. Good at the time he
was in the bank did inform the banking officials as to the
McCoy transactions, and for the further purpose of offering in
evidence the notice which was sent to the bank before suit was
commenced, in which we offered to permit them to inspect all
of these checks at the office of the United States Attorney.
That offer may affect the state of the record on appeal, while
it may not affect Your Honor's decision.

THE COURT : I will allow you to reopen the case for that
purpose.

W. G. GOOD, being recalled as a witness on behalf of the
plaintiff, testified as follows :

DIRECT EXAMINATION

BY MR. McLAREX :

Q Mr. Good, you have testified already that you called
at the Xational Bank of Commerce of Seattle at the time you
were making the investigation regarding Mr. McCoy. Do
you recollect which ones of these checks now in evidence, if
any, the bank still had in its possession at that time?

A They had the checks that were issued for July and
August.

Q Of 1909?

A Two months, yes sir.

Q AMiat statements, if any, did you make to the officials

NATIONAL BANK OF COMMERCE. 119

of the bank at that time regarding those checks, regarding Mr.
McCoy's transactions?

A I secured the checks —

MR. McCORD: I object to that as to any statements he
made so far as their being binding upon this defendant is con-
cerned. This witness was trying to get evidence against Mr.
McCoy. He was not authorized by the United States to bind
the United Sstates by any representations he might have made.

MR. McLaren : I am proving notice to the bank, Your
Honor.

THE COURT : I will overrule the objection.

MR. McCORD: Exception.

A ( Continuing. ) Well, in the first place, of course when
I approached the bank I told them what my purpose was and
what I was there for, that I was investigating Mr. McCoy's
business methods, and if I remember right, I had a letter to
the bank by Mr. Todd I think, issued by :\Ir. Todd; however,
they were very frank and secured these checks for July and
August, and I had them in my possession for three or four days.

Q And you returned them to the bank?

A I returned them to the bank and after — 1 think it was
after Mr. McCoy pled guilty and I advised them of what took
place in connection with Mr. McCoy and that those checks were
fraudulent and that he admitted it, and so forth.

Q And you told the banking officers, did you, that the
checks were fraudulent?

A Oh, yes.

Q And in what way they were fraudulent?

A Yes sir, I gave them the history of the whole case and
the transactions in connection with my investigation at that
time.

Q You left the checks in their possession?

A Oh yes, I returned them.

120 UNITED STATES OF AMERICA VS.

CROSS-EXAMINATION

BY MR. McCORD:

Q Whom did jou have your conversation with?

A Now, I can't recall the gentleman's name; there was
two men, one man had charge of the Government's disbursing
accounts, and then there was a young man there, either as-
sistant cashier — I can't recall his name now.

Q It was not an officer of the bank; you don't know
whether it was or not?

A He had some title, assistant cashier I think he was.

(Witness excused.)

MR. McLaren : I offer in evidence as Plaintiff's Exhibit
"K" a—

( Paper handed to Mr. McCord. )

MR. McLaren : I offer in evidence as Plaintiff's Exhibit
"K", a certain letter dated March 4, 1910, addressed to the
National Bank of Commerce, by the United States Attorney of
Seattle, accompanied by a list of all the checks in dispute, which
letter offers the bank permission to examine the checks at any
time by its officials or by its attorneys.

MR. McCORD : I object to it as irrelevant, incompetent
and immaterial.

MR. McLaren : You v\-ill find the return of the ^Marshall
attached to the letter, showing service on the bank.

THE COURT : I overrule the objection. It may be
admitted.

Letter referred to admitted in evidence and marked Plain-
tiff's Exhibit "K".

C. W. McKERCHER, called as a witness on behalf of the
plaintiff, being first duly sworn, testified as follows :

DIRECT EXAMINATION

BY MR. MCLAREN :

Q Your name is C. W. McKercher?
A It is.

NATIONAL BANK OF COMMERCE. 121

Q You are a clerk in the United States Attorney's office?

A Yes sir.

Q Do you recollect any official or employee of the Na-
tional Bank of Commerce calling upon you in response to this
letter which I hand you, Exhibit "K"?

A I don't know that it was in response to that letter; Mr.
Brownell, Chief Clerk at the bank, called.

Q For what purpose did he call?

MR. McCORD: I object to that as incompetent, irre-
levant, immaterial and hearsay. The clerk of the bank would
not be able to bind this bank.

THE COURT : I overrule the objection.

A He called to see the indorsements on the checks.

Q The indorsements on these checks in dispute in this
case?

A Yes sir.

Q Did you show him those checks?

A I did.

Q Did you show him all of them?

A I did.

Q Do you recollect how soon after the date of that letter,
March 4, 1910, this happened?

A No, I do not.

Q Would you say it was shortly afterward?

MR. McCORD : I object to that as leading.

THE COURT : Overruled.

A It was at tlie time that Mr. Todd was in Washington
during the Ballinger-Pinchot controversy; I don't know the
date of it except in that way.

MR. McCORD: That was in June, wasn't it?

THE WITNESS : I don't recall the date.

MR. McCORD: I saw Mr. Todd in Washington, that is
how I happen to know.

Q Did Mr. Brownell or anybody else for the bank at that
time or any other time make any demand upon you for the
possession of the checks?

122 UNITED STATES OF AMERICA VS.

A He did not.

Q He made an examination of all of them?

A As many as he wished.

Q You offered him to inspect all of them?

A I did.

CROSS EXAMINATION

BY MR. McCORD:

Q That was some seyeral months after March 4th?

A Y^es sir.

(Witness excused.)

MR. McCORD: I now renew my motion for a non-suit on
the same ground, Your Honor.

THE COURT : The motion is granted.

MR. McLaren : The Court will allow us an exception.

THE COURT: Exception allowed. The Clerk will enter
an order granting a non-suit. The jurors are all excused from
attendance until tomorrow morning at ten o'clocTv.

In the United states Circuit Court for the Western District of
Washington^ Western Division.

The United States of America,
Western District of Washington — ss.

UNITED STATES OF AMERICA, "|

Plaintiff, \ ^^ -i933_

^r T> i»T r.r^^r ^^' \ INDICTMENT.

M. p. McCOY, I

Defendant. J

Violation of Sec. 5488 R. S.

JULY TERM A. D. 1909.

The Grand Jurors of the United States of America, duly
impaneled, sworn and charged to inquire within and for the
Western District of Washington, upon their oaths present:

NATIONAL BANK OF COMMERCE. 123

That one M. P. McCo}', heretofore, to-wit : Ou the 31st day
of March, 1909, and at various times between that date and
the first day of September, 1909, in the City of Seattle, in said
District, being then and there an examiner of surveys employed
by the General Land Office of the United States, and as such
officer being at said times and place a disbursing officer of the
United States and entrusted with certain public moneys of the
United States ; did, by virtue of his said office and employment
and while so employed and acting as such disbursing officer of
the United States, receive and take into his possession certain
public moneys of the United States, to-wit: the sum of Five
Thousand Seven Hundred and Eighteen ($5,718.00) Dollars,
lawful money of the United States of America, then and there
the property of the United States, a more particular descrip-
tion of which money is to the Grand Jurors unknown; and the
said M. P. McCoy did then and there wilfully, unlawfully and
feloniously embezzle and convert to his own use said public
moneys of the United States, to-wit, the sum of Five Thousand
Seven Hundred and Eighteen (|5,718.00) Dollars, lawful
money of the United States, a more particular descri^Dtion of
which money so embezzled as aforesaid, being to the Grand
Jurors unknown; contrary to the form of the statute in such
case made and provided, and against the peace and dignity of
the United States of America,

ELMER E. TODD,
United States Attorney.

Witnesses examined before Grand Jurors : Elmer E. Todd.

Indorsed : Indictment for Violation Sec. 5488 R. S. Case
No. 1933. Plaintiff's Exhibit H. United States District
Court. Western Dist. of Washington. Filed March 13, 1912.
A. W. Engle, Clerk.

124 UNITED STATES OP AMERICA VS.

4-207-r.

ETDB
DEPARTMENT OF THE INTERIOR
WTP GENERAL LAND OFFICE

WASHINGTON

February 28, 1912.
I hereby certify that the annexed copies of letters from this
office addressed to M. P. McCoy, Examiner, are true and literal
exemplifications of the official record of said letters in this
office.

IN TESTIMONY WHEREOF I have hereunto subscribed
my name and caused the seal of this office to be affixed, at the
city of Washington, on the day and year above written.

H. W. SAN FORD,
( Seal of Recorder of the General Land Office.

United States General
Land Office)
Plaintiff's Exhibit "J" offered but not admitted in evidence.

In Reply Please Refer to
"E"
4"WB
172408
1907

DEPARTMENT OF THE INTERIOR CLDB
GENERAL LAND OFFICE

Washington, D. C, October 15, 1907
ADDRESS ONLY THE
Commissioner of the General Land Office

SCHEDULE OF COLVILLE ALLOTMENTS.

Mr. M. P. McCoy,
Examiner,

Seattle, Washington.
Sir:

Your letter of October 3, 1907, is received, reporting receipt
of data from Olympia, and non-receipt of instructions, which

>'ATIOXAL BANK OF COMMERCE. 125

must have reached you soon after said date. I transmit here-
with a copy of all the remaining parts of the Colville schedule
of Indian allotments, which have not heretofore been supplied
for your use in verifying and reporting their condition.

Of the 14 townships represented, six are still unsurveyed,
and in those you are not required to investigate. Three tracts
are in Tp. 39, R. 33, which you have already examined, but
they were not found and reported by Deputy Shelton ; so it is
necessary to examine their status, and report as to the neces-
sity of a correction survey. Allotment Xo. 278 for E. Dupuis
appears also omitted from the survey of section 34, Tp. 37, R. 33.

As you state you are not informed as to what townships
have been suspended for segregation, you are now advised that
a general suspending order was telegTaphed to the Waterville
and Spokane offices Sept. 20, 1906, affecting all puhlic lands
in the north or ceded part of the Colville Reserve, besides orders
by letters specifying various townships.

Very respectfully,

FRED DENNETT,
JCP Acting Commissioner,

In Reply Please Refer to

WTP

208772-1907

DEPARTMENT OF THE INTERIOR CLDB
GENERAL LAND OFFICE
Address only the Washington, December 11, 1907.
Commissioner of the General Land oflflce

Schedule of Indian Allotments,

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:

I transmit herewith, a requested in your letter dated No-
vember 24, 1907, a copy of the schedule of Indian allotments in

12(3 UNITED STATES OF AMERICA VS.

T. 40 N., K. 32 E., Washington, transmitted with your letter
dated June 2, 1907.

Very respectfully,

FRED DENNETT,
L.J. Assistant Commissioner.

In Eeply Please Refer to

WTP

211973-1907

DEPARTMENT OF THE INTERIOR C L D B
GENERAL LAND OFFICE

Washington, D. C, December 13, 1907.
Address only the
Commissioner of the General Land office.

Instructions to Examiner of Surveys.

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:

Upon completion of the work in connection with the Indian
allotments in the ceded portion of the Colville Indian Reserva-
tion, W^ashington, you are requested to x)repare and transmit
your detailed report of the examination of the survey of the
standard lines in the diminished reservation, executed by With-
am and Whitham, D. S., uuder their contract No. 635, exam-
ined by you last spring.

The returns of said survey have been pending in this
office for some time and it is desired that action may be taken
thereon at the earliest practicable date.

In connection with the work upon which you are now en-
gaged, it is noted that a description of the allotments in the
following unsurveyed townships has been furnished you :
Tps. 36 N., Rs. 29 and 30 E.
Tps. 35, 39 and 40 N., R. 31 E.

NATIONAL BANK OF COMMERCE. 127

T. 40 N., R. 35 E.

Tps. 35 N., Rs. 36 and 37 E.

Your present orders are not intended to cover any investi-
gation of the allotments in these townships, as it will be the
duty of the deputies who are to make the surveys therein to
segregate said allotments from the public lands.

Very respectfully,

FRED DENNETT,
L.J. Assistant Commissioner.

In Reply Please Refer to

WTP

208656-1907

DEPARTMENT OF THE INTERIOR CLDB
GENERAL LAND OFFICE

Washington, D. C, December 19, 1907.

Address only the
Commissioner of the General Land Office

Instructions to Examiner of Surveys.

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:—

I transmit herewith for examination as to the bona fides of
the alleged settlers the applications for the survey of T. 39 N.,
R. 31 E. and T. 21 N., R. 9 E., Washington. The surveyor
general has, by letter of even date herewith, been directed to
transmit to you direct such other applications as may be re-
ceived.

Very respectfully,

FRED DENNETT,
L.J. Assistant Commissioner.

128 UNITED vSTATES OF AMERICA VS.

In Eeply Please Refer to ' W.T.P.

WTP

218705—1907.

DEPARTMENT OF THE INTERIOR
GENERAL LAND OFFICE

Washington, D. C, December 26, 1907.
Address only the
Commissioner of the General Land Office

INSTRUCTIONS TO EXAMINER OF SURVEYS

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:

I transmit herewith for examination as to the bona fides
of alleged settlers the applications for survey of T. 37 N., R. 40
E., Washington.

Very respectfully,

FRED DENNETT,
L.J. Assistant Commissioner.

In Reply Please Refer To

E DEPARTMENT OF THE INTERIOR C.L.D.B.

W.T.P.

221864-1907. GENERAL LAND OFFICE

Washington, D. C, January 7, 1908.
Address only the
Commissioner of the General Land Office

Indian allotments : Colville Indian Reservation.

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:

In reply to your letter dated December 18, 1907, relative to
allotment No. 65, Agnes, in T. 40 N., R. 32 E,, Washington, you

NATIONAL BANK OF COMMERCE. 129

are advised that the proper description of said allotment is as
follows: W.i/o NW.i/4 NE.i/4 NW.i/4 section 35 and NE.l^
NW.14 NW.14 east of Kettle River in section 35 and SW.i^
SW.i/i east of Kettle Eiver in section 26, WA/z SE.14 NW.14
SW.14, section 26 and SW.i^ NW.i/4 SW.i/4 east of Kettle
Eiver in section 26, said township. Any other description fur-
nished you is incorrect.

The allotment No. 11 of Leo Tonasket has been properly
shown upon a supplemental plat approved March 1, 1907, and
it appears that no further action is necessary in connection
therewith on the part of this office, the facts contained in your
letter dated June 2, 1907, relative thereto having been sub-
mitted to the Indian office with my letter dated June 15, 1907,
and no further action seems to have been taken.

Very respectfully,

FRED DENNETT,
L.J. Assistant Commissioner.

In Reply Please Refer To

DEPARTMENT OF THE INTERIOR C.L.D.B.
E GENERAL LAND OFFICE

W.T.P.

198121-221863 Washington, D. C, January 9, 1908.

1907

Address only the
Commissioner of the General Land Office

Instructions to Examiner of Surveys

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:

In reply to your letter dated November 6, 1907, relative to
the survey of allotment No. 33, Julia Chesaw, in section 21, T.
40 N., R. 30 E., you are directed to submit your field notes of

130 UNITED STATES OF AMERICA VS.

survey to the surveyor general for transcribing and platting
if you have not already done so.

Your action in proceeding with the examination of such
surveys as can be reached at this season of the year, as re-
ported in your letter dated December 18, 1907, is approved.

Upon completion thereof, you will prepare and submit
your reports, after which you will proceed with the examination
of bona fides.

Very respectfully,

FRED DENNETT,
L.J. Assistant Commissioner.

In Reply Please Refer to

"E"

36199-1908

WTP

DEPARTMENT OF THE INTERIOR CLDB
GENERAL LAND OFFICE

Washington, D. C, March 6, 1908.

Address only the
Commissioner of the General Land Office

Instructions to Examiner of Surveys.

Mr. M. P. McCoy,

Examiner of Surveys,

Seattle, Washington.
Sir:

In reply to your letter dated February 16, 1908, requesting
instructions as to further work, you are hereby directed, upon
receipt hereof, to proceed to western Montana and examine the
bona fides of settlers in the following townships, the applica-
tions for the survey of which are herewith transmitted under
separate cover:

NATIONAL BANK OF COMMERCE. 131

Group No. 1.
Ts. 1 N., Rs. 21 and 22 W.
T. 2 N., R. 19 W.
Tps. 3 and 4 N., R. 21 W.
Tps. 1 S., Rs. 21 and 22 W.
Tps. 2 and 3 S., R. 22 W.

Group No. 2.
T. 26 N., R. 22 W.
T. 29 N., R. 18 W.
Tps. 31 N., Rs. 20 and 24 W.
Tps. 32 N., Rs. 20, 21, 22 and 28 W.
tps. 33 and 34 N., R. 27 W.

Group 3.
Tps. 25 N., Rs. 33 and 34 W.
A map of Montana and a supply of blanks for reports are
herewith transmitted.

You will take with you your surveying outfit for use in
case it should be deemed expedient to later assign to you the
field examination of certain surveys in Montana.

Very respectfully,

FRED DENNETT,
J.R.A. Commissioner.

In Reply Please Refer To

"E"WTP
48326 53824
54781 57436
59454
1908.

DEPARTMENT OF THE INTERIOR CLDB
GENERAL LAND OFFICE

Washington, D. C, March 31, 1908.

Address only the
Commissioner of the General Land Office.

Instructions to Examiner of Surveys.

132 UNITED STATES OF AMERICA VS.

Mr. M. P. McCoy,

Examiner of Surveys,

Missoula, Montana.
Sir:

In reply to your letter dated March 17, 1908, you are re-
quested to return to tlie Surveyor General for Washington
all data in your hands relating to surveys in his district and
to advise him to hold the same for further investigation.

In addition to the work heretofore assigned you in Mon-
tana, you are directed to examine the hona fides of applicants
for the survey of the following townships in Montana, the peti-
tions therefor being herewith transmitted, viz. :

T. 37 X., R. 2 W., T. 28 E., R. 19 E., T. 37 N., R. 21 E., T.
29 X., R. 36 E., Ts. 30N., Rs. 33 and 34 E., T. 25 N., R. 33 E.,
and T. 26 N., R. 42 E.

In connection therewith you are directed to obtain the nec-
essary data and examine the survey executed by Fred I. Hub-
bard, D. S., under his contract No. 510, and, if data is obtained
from the surveyor General, that by Parkinson and Douglas,
D. S., under their contract No. 517.

Very respectfully,

FRED DENNETT,
J.R.A. Commissioner.

In Reply Please Refer to

E DEPARTMENT OF THE INTERIOR C.L.D.B.

DB. GENERAL LAND OFFICE

Washington, D. C, April 14, 1908.
Address only the
Commissioner of the General Land office.

Mr. M. P. McCoy,

Examiner of Surveys,

Helena, Montana.

Sir:

I have your letter of the 8th instant in which you ask to
be allowed to continue examinations in the State of Washing-

NATIONAL BANK OF COMMERCE, 133

ton, as your wife cannot live in the liigh altitudes of Montana
where you are at present assigned. You fear that your work
has not been satisfactory to this office.

In reply 3'ou are informed that your services in the State
of Washington have been very acceptable and no fault is found
with the character of your work.

Your assignment to Montana was owing solely to the ne-
cessities of the service, and in the interest of good administra-
tion.

No instructions were given you as to a permanent assign-
ment to Montana, but directions were forwarded indicating
that your stay in the latter State would probably extend over
the coming surveying season.

I regTet that I- cannot immediately comply with your per-
sonal request to return to Washington to continue examinations
there as the exigencies of the work may require a longer de-
tention in Montana.

I will, however, endeavor to have your examinations con-
fined, as far as practicable, to the lower altitudes in eastern
Montana, which I hope will enable you to prosecute the work
with your usual fidelity.

Very respectfully,
L.J. FRED DENNETT,

Commissioner.
In Reply Please Refer to

WTP

83637)

83658)1908

83659)

DEPARTMENT OF THE INTERIOR WTP

GENERAL LAND OFFICE

Washington, D. C, May 5, 1909.
Address only the
Commissioner of the General Land Office

Procedure in Examination of Surveys.

134 UNITED STATES OF AMERICA VS.

Mr. M. P. McCoy,

Examiner of Surveys,

Great Falls, Montana.

Sir:

In reply to your letter dated April 17, 1908, you are hereby
authorized to transport your two permanent assistants from
the State of Washington to the District of Montana, where you
are now engaged in the examination of surveys.

With reference to your proposed examination of surveys
executed in northeastern Montana, payable from special de-
posits by the Northern Pacific Railway Co., you are advised
that this office has, by letter of even date herewith, requested
the Secretary of the Interior for general authority to authorize
examiners of surveys to employ transitmen to organize auxili-
ary parties and examine surveys under the personal supervision
of the examiners and upon the granting of such authority, you
will be further advised.

Very respectfully,

FRED DENNETT,
JCB Commissioner.

In Reply Refer to

"E" DEPARTMENT OF THE INTERIOR C.L.D.B

W.T.P.

83637) GENERAL LAND OFFICE

88700)1908

Washington, D. C, June 18, 1908.
Address only the
Commissioner of the General Land Office

Instructions to Examiner of Surveys.

Mr. M. P. McCoy,

Examiner of Surveys,

Great Falls, Montana.
Sir:

You are advised that under departmental authority dated
May 5, 1908, examiners are authorized to emi)loy a competent

NATIONAL BANK OF COMMERCE. 135

assistant as transitman in charge of an auxiliary party under
the supervision of the examiner to assist in the examination of
surveys, at a salary of |100 per month and actual necessary
expenses of transportation and subsistence. In accordance with
yoiu* recommendation dated April 21, 1908, you are hereby
authorized to employ John D. King as transitman to assist
you in the examination of the surveys assigned to you in north-
eastern Montana, and as outlined in your said letter. A solar
transit, tripod, chain, tape and set of pins has been sent to
you at Culbertson, Montana, the receipt for the two boxes sent
by express being herewith transmitted. The report of work
done by the transitman should be included in your weekly
report.

Very respectfully,

H. H. SCHWAKTZ,
JCP Acting Assistant Commissioner.

In Reply Please Refer To

DEPARTMENT OF THE INTERIOR C.L.D.B.
E. GENERAL LAND OFFICE

W.T.P.
151779-1908

Washington, D. C, August 22, 1908.
Address only the
Commissioner of the General Land Office

Instructions to Examiner of Surveys.
Mr. M. P. McCoy,

Examiner of Surveys,

Great Falls, Montana.
Sir:

In reply to your letter dated August 12, 1908, relative to
the examination of surveys in Montana, you are advised that
the Surveyor General has been directed to transmit to you at
the earliest practicable date the data for the examination of
contracts No. 515, A. E. Gumming, D. S., Nos. 530 and 531,
Fessenden and Ross, D. D., and No. 542, R. C. Durnford, D. S.

136 UNITED STATES OF AMERICA VS.

The survey under contract No. 505 within the Fort Peck
Indian Keservation is being examined by A. F. Dunnington,
Topographer in Charge of the surveys within said reservation.

Weather and flood conditions in the southeastern part of
the district early in the season rendered it expedient for ex-
aminer Wilkes to take up some of the work which it was
thought would be examined by you later, but it is believed that
there will be enough completed work in the northeastern part
of the state to keep you steadily at work.

The Surveyor General reports the probable early com-
pletion of the contracts Nos. 518 and 519, George H. Potter,
D. S. and Nos. 526 and 527, Williams and Hertz, D. S.

You will include also the examination of T. 9 N., R. 33 E.,
Harley J. Riley, D, S., under contract No. 500, Tps. 2 and 3
N., R. 28 E., Page and Page, D. S., contract No. 513 and T. 7
S. R. 24 E., contract No. 512, George L. Elmer, D. S., the
same being isolated townships not yet examined.

Mr. Wilkes, whose address is Miles City, Montana, has been
directed to confine his operations to the district south of the
Yellowstone and east of the P>ig Horn Rivers and to send to
you at Great Falls any data in his hands for the isolated work
above referred to.

Very respectfully,

FRED DENNETT,
ALP. Commissioner.

In Reply Please Refer To.

"E"

W.T.P.

W\T.P. DEPARTMENT OF THE INTERIOR C.L.D.B.

189338-1908

GENERAL LAND OFFICE

Washington, D. C, November 25, 1908.
Address only the
Commissioner of the General Land Office

Instructions to Examiner of Surveys.

NATIONAL BANK OF COMMERCE, 137

Mr. M. P. McCoy,

Examiner of Surveys,

Great Falls, Montana.
Sir:

In reply to your letter dated November 8, 1908, you are di-
rected, upon the advent of unfavorable weather conditions for
the prosecution of field work, to return to Seattle, Washing-
ton, and submit your reports.

You are requested to inform the Surveyor General of Mon-
tana, upon completion of your field examination of each sur-
vey, whether you will recommend the acceptance thereof, or, if
corrections are required, to what extent.

Very respectfully,

FEED DENNETT,
JCP. Commissioner.

OFFICE AUDITOE INTEEIOR DEPT.

Feb 28 1912

A.M.9 12 2 4 P.M.

March 4, 1910.
The National Bank Of Commerce,

Seattle, Washington.
Gentlemen :

On behalf of the United States of America, I hereby make
demand upon you for repayment of the sum of |15,129.81, on
account of checks which were issued by M. P. McCoy, examiner
of surveys and special disbursing agent for the Department of
the Interior during the years 1907, 1908 and 1909, which
checks were paid by you upon forged endorsements, the en-
dorsement of payee in each instance being a forgery.

Attached hereto is the list of said checks with the date of
each, the name of the payee, the amount of each check, and
the bank or banks through which it was passed before being
paid by the National Bank of Commerce.

138 UNITED STATES OF AMERICA VS.

All these checks are in my office at the Federal Building
and your officers and attorneys will be allowed to inspect them
if you so desire.

Respectfully,

ELMER E. TODD,
Encl United States Attorney.

RETURN OF SERVICE

The United States of America
Western District of Washington— ss.

I hereby certify and return that I served the annexed letter
on the therein-named bank by delivering the original thereof to
R. R. Spencer, its 1st vice president, personally, at the place
of business of said bank at Seattle in said District on the 5th
dav of March, A. D. 1910.

C. B. HOPKINS,

United States Marshal,
By M. T. :McGRAW, Deputy.

NATIONAL BANK OF COMMERCE. 139

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148 UNITED STATES OF AMERICA VS.

In the Circuit Court of the United States for the Western
District of Washington, Northern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

;>- No. 1933-C
NATIONAL BANK OF COMMERCE,

a corporation,

Defendant.

Testimony of M. P. McCoy, a witness in behalf of the plain-
tiff, taken before

DENTON M. CROW,
United States Commissioner, at Spokane, Washington,

February 19, 1912.
Mr. McLaren, of Todd & McLaren, appearing in behalf of the
plaintiff.

Mr. McCord, of Kerr & McCord, appearing in behalf of the
defendant.

The United States of America
Eastern District of Washington
State of Washington
County of Spokane. — ss.

The examination of a witness de bene esse, beginning on the
19th day of February, 1912, on behalf of the plaintiff, before
me, Denton M. Crow, a United States Commissioner in and
for the Eastern District of Washington, at my office at the
City of Spokane, Spokane County, Washington, in a certain
suit now pending in the United States District Court for the
Western District of Washington, Northern Division, wherein
the United States of America is plaintiff, and The National
Bank of Commerce, a corporation, is defendant,

M. P. McCOY, a witness on behalf of the plaintiff', being
first duly sworn, on oath deposes and says as follows:

NATIONAL BANK OF COMMERCE. 149

DIRECT EXAMINATION by Mr. McLaren.

Q Your name is M. P. McCoy, is it?

A Yes sir.

Q Y'oii were formerly in tlie Government service?

A Yes sir, as examiner of surveys for the General Land
Office.

Q What was your official title?

A Examiner of Surveys and Special Purchasing Agent.

Q Where were your headquarters?

A Seattle.

Q During what period of time did you occupy that po-
sition?

A From about 1900 until about two years ago.

Q About November, 1909?

A Y'es sir.

Q Y^ou held that position continuously during that time?

A Y"es sir.

Q W^hat other important position, if any, did you hold
prior to that period?

A I was a member of the Geological Survey for the In-
terior Department.

Q For about how long?

A For about ten years before that.

Q What were your duties as examiner of surveys and spec-
ial disbursing agent, what was the nature of your work?

A The public lands are surveyed by contract, by deputy
surveyors and my business was to inspect their surveys in the
laeld after their finishing their work — checking it up in other
words to see if it was correct.

Q About how wide a territory did your duties cover?

A Well I was in the States of Washington, Oregon, Idaho
and Montana.

Q And you say that your headquarters were at Seattle?

A Yes sir.

Q What was it necessary for you to do, Mr. McCoy, in or-

150 UNITED STATES OF AMERICA VS.

der to go around examining these public — these surveys of
public lands, what did you have to do?

A To inspect the surveys in the field, which necessitated
transportation and assistants and subsistance for the assist-
ants.

Q You were authorized by the Government to employ

men for that purpose?

A And to incur all these expenses.

Q Were some of these surveys made in the State of
Washington?

A Yes sir.

Q Where for instance?

A Well throughout the state.

Q You got your instructions from Washington, D. C?

A Yes sir.

Q Were these instructions given to you for each particular
survey, or were they in the nature of general instructions which
you were to follow out?

A There were general instructions and sometimes special
instructions.

Q Under the general instructions, did you have your own
option as to the order in which you took up the examination
of the different surveys?

A Yes sir.

Q What arrangement was made relative to the payment
of the bills that you might incur under your authority for the
performance of your duties?

By MR. McCORD :

Q Were these instructions in writing?

A Yes sir.

By MR. McLaren :

Q What became of these instructions, Mr. McCoy?

A I burned them something like two years ago, when this
trouble began, I burned all my field notes and note books and
all things of that kind. I had a trunk full and I burned them.

Q Can you give us, briefly, the arrangements you had with

NATIONAL BANK OF COMMERCE. 151

the Goverumeut, whereby this money was to be paid for labor,
or for services, or material, which you might incur?

MR. McCORD: I object as that is not the best evidence
and no proper foundation has been laid for the introduction of
secondary evidence.

Q I will ask you this question, Mr. McCoy— From where
did you get your instructions regarding the payment of this
money?

A From the commissioner of the general land office.

Q Were they oral, or in writing?

A AVritten.

Q These written instructions, you still have them?

A No sir.

Q What became of them?

A I burned them.

Q I will ask you what your instructions were, as to how
you were to pay these men?

MR. McCORD: I object as it is not the best evidence;
asking for the contents of a written instrument; there is not
shown any reason why the originals cannot be produced. The
best evidence would be the files in the Land Office at Wash-
ington, or a copy of them.

A My instructions were to pay the necessary expenses to
carry out the examination of these different surveys.

Q How were you to pay them?

A I was to pay them as disbursing agent.

Q I mean by check or by cash?

A Well laterly I paid everything — I guess during this
period in dispute, I guess, I paid everything by check.

Q On what banks were your checks drawn?

A The National Bank of Commerce of Seattle.

Q You had an account there?

MR. McCORD : I move to strike out the testimony as not
responsive to the question, he asked how he was instructed to
do and he answered how he did it.

152 UNITED STATES OF AMERICA VS.

A Yes sir, I had an account with the National Bank of
Commerce as Special Disbursing Agent.

Q You drew on that account, in accordance with your in-
structions, for the payment of bills and expenses?

A Yes sir.

Q Now, Mr. McCoy, I will ask you to examine this bundle
of checks, which I hand you, and state whether, or not, they
were issued by you while you were in the employ of the Gov-
ernment ?

A Yes sir.

Q On each check that is your signature, M. P. McCoy,
Examiner of Surveys and S. P. A.

A Yes sir.

Q S. P. A.? Special Disbursing Agent.

A Yes sir.

Q Mr. ]McCoy, what is the meaning of the marginal no-
tation. Voucher Number 6, or Voucher number so and so, on
the check, what does that refer to?

A In making mj quarterly statement, or rendering my
quarterly account to the General Land Office, I submitted a
voucher for each check, up until along about in September, or
October, or November, 1909.

Q 1908 you mean, Mr. McCoy?

A Yes sir, it was in 1908, from that time on I used a new
form of payroll that covered the payroll expenses, but I still
used the voucher plan for sustenance and transportation.

Q And supplies?

A Yes sir.

Q Examine these checks again, Mr. McCoy, are the names
of the payees real or fictitious persons in each instance?

A Fictitious.

Q That is there were no such persons?

A No sir.

Q Does this apply to each of them to whom these checks
were made out?

A Y^es sir.

NATIONAL BANK OF COMMERCE. 153

Q Examine the endorsements on the back, Mr. McCoy, and
state whose individual endorsement is on the back of these
checks, if you know?

A I do.

Q Are these endorsements, one or more on each check, are
these the endorsements of real persons or fictitious persons?

A Fictitious persons.

Q Did the Government receive any services, or supplies
or anything of value in exchange for these checks?

MR. McCORD : I object to that as incompetent, irrelevant
and immaterial.

A No sir.

Q Did you receive the money on these checlvs, in each
instance?

A Yes sir.

Q For the amount of the check?

A Yes sir.

Q So far as the appearance of these checks go, Mr. McCoy,
are they made out in the same form and in the same manner
as you made out checks to real persons for real services ren-
dered?

A They are.

Q That is they are apparently regular on their face, are
they not?

A Yes sir.

Q I believe I asked you if you made the endorsements on
the back yourself?

A Yes sir.

Q Take, for instance, the first check, October 14, 1907,
number one, payable to Albert Peterson, you had no such per-
son as Albert Peterson rendering service at that time?

A No sir.

Q You endorsed it Albert Peterson and J. D. King?

A Yes sir.

Q And that way you received the money yourself?

A Yes sir.

154 UNITED STATES OF AMERICA VS.

Q That statement of fact is true of each check?

A Yes sir.

MR. McLaren : I offer in evidence this bundle of checks,
as plaintiff's exhibit "A."

MR. McCORD: I object as incompetent, irrelevant and
immaterial and the instruments not properly identified.

Q You got these blank checks from the National Bank of
Commerce when you opened up your account?

A Yes sir.

Q Did the cancelled checks come back to you, Mr. McCoy,
or were they sent by the bank to the Department?

A They did not come back to me.

Q Now while you were — During the period that is covered
by these checks, you were doing some actual work for the Gov-
ernment, were you not, in the performance of your duties?

A Y^es sir.

Q How often were you required to send in reports to the
Department in Washington?

A Weekly.

Q Did you send in weekly reports during this period cov-
ered by these checks in evidence?

A Yes sir.

Q I believe you testified that these checks, so far as ap-
pearance goes, are the same as real checks issued to real per-
sons by you?

A Yes sir.

Q Now you spoke, a moment ago, Mr. McCoy, about a
voucher system that was prevelant between you and the De-
partment, I will ask you now to take this bundle of vouchers
and examine them, these for the— marked for the month of
October, 1907. I will take voucher number six as an example.
This purports to be signed by Albert Peterson, for services
rendered of the amount of twenty dollars, from October 5th,
1907, to October 14, 1907, and down below that is the signa-
ture of M. P. McCoy approving the same,— Is that a genuine
or fraudulent voucher?

NATIONAL BANK OF COMMERCE. 155

A Frauduleut.

Q You signed the name Albert Peterson?

A Yes sir.

Q Tlien you approved it, with your own signature, as ac-
tually rendered to the Government for services?

A Yes sir.

Q Now will you go through the list of vouchers I hand
you, for the month of October, 1907, and state whether or not
they correspond with the voucher number noted on the margin
of the checks for that same month — You have checked over
these vouchers for the various months covered by the fraudu-
lent checks shown as Exhibit "A"?

A Yes sir.

Q These vouchers are the vouchers referred to on the mar-
gin of the checks?

A Yes sir, they are.

Q How often did you send these vouchers to the Depart-
ment?

A Quarterly.

Q Every three months?

A Yes sir,

Q I now hand you another document, certificate for the
month of October, 1907, is that your signature, M. P. McCoy,
Examiner of Surveys?

A Yes sir.

Q That refers, does it not, to the individual vouch-
ers that you have just examined for that month?

A Yes sir.

Q That is a statement that you sent in as a part, or a sum-
mary of the quarterly account?

A Yes sir,

ME, McLAKEN : I now offer in evidence, as plaintiff's
exhibit "B" the vouchers just testified to by the witness as hav-
ing been sent in by him, quarterl^^, to the Department at Wash-
ington, D. C, for the following months: October, 1907; No-
vember, 1907; December, 1907; May, 1908; June, 1908; July,

156 UNITED STxVTES OF AMERICA VS.

1908; August, 1908; September, 1908; October, 1908; Novem-
ber, 1908; December, 1908; January, 1909; March, 1909; April,
1909; May, 1909, and June, 1909.

ME. McCORD: I object to each of them as incompetent,
irrelevant and immaterial and for the further reason that they
show, in the light of the witness's testimony that they are all
fraudulent.

Q Mr. McCoy, state whether, or not, it is true that these
vouchers, just introduced in evidence, were in accordance with
the usual and regular method of handing in vouchers that was
in use between you and the Department at the time that they
were sent in?

Mil. McCORD : I object to that as incompetent, irrelev-
ant and immaterial.

ME. McLaren : It may be stricken out by consent.

Q Is there anything in the — You say that, along about
October, 1908, the Department changed this system of vouchers?

MR. McCORD: What do you mean by that?

MR. McLaren : It just means that instead of the
voucher plan, it was done by payrolls system.

ME. McCORD: What date Avas that made?

MR. McLAREN : October 8, 1908.

Q Examine these vouchers for October, 1908, and see if
that was the new or the old system that was employed during
that month, whether it is the individual voucher system, or the
payroll system?

A That is the payroll system.

Q That is for sustenance?

A Yes sir.

Q You retained the individual voucher system for supplies
and material?

A Yes sir.

Q How is it Mr. McCoy that no vouchers are found for
the last two months' issue of fraudulent checks, that is the
months of July and August, 1909 — did you ever send in any
vouchers for those two months?

NATIONAL BANK OF COM^MERCB. 157

A I sent no vouchers in because I was arrested before
the quarterly account was sent in.

Q It is true, is it not, that the vouchers that you sent in
for all of the other mouths were apparently regular and were
in the usual form and manner?

A Yes sir.

MR. McCORD : Q. When were you arrested?

A September, 1909, about September 1st.

Q You say, Mr. McCoy, that you sent in statements to
the Department quarterly, will you examine these — Referring,
Mr. McCoy, to the voucher for October, 1908, and the other
vouchers covered by the fraudulent period, whom did you say
these vouchers were sent to?

A To the Commissioner of the General Land Office.

Q And were sent quarterly?

A Quarterly.

Q Now will you explain, Mr. McCoy, what these accounts
are, which I hand you, and which are signed by M. P. McCoy
special disbursement account?

A That is an account current for the quarter.

Q Covering the period from October 1st, 1907, to Decem-
ber 31st, 1907?

A Yes sir.

Q When you sent these quarterly account current in which
you say you did quarterly, did you or did you not transmit
with them the individual vouchers covering that same period?

A Yes sir.

Q Take the next one, from January 1st, 1908, to March
31st, 1908, is that your signature?

A Yes sir.

Q The same is true as to that?

A Yes sir.

Q The same is true as to all the vouchers down to a certain
point?

A Yes sir.

158 UNITED STATES OF AMERICA VS.

Q Now calling your attention to the account current from
July 1st, 1908, to September 30th, 1908?

A It is not true of that one. That is not the same thing
I had in mind.

Q Take up the one, running from October 1st, to December
31st, 1908, and examine the leaflets on the inside, the outline
of expenditures, the first item, October 31st is the payroll —
That was the payroll system?

A Yes sir.

Q Now examine all of these quarterly accounts current,
which I hand you, they are all signed by yourself, are they not
as special disbursing agent?

A Yes sir.

Q These were sent in by you quarterly?

A Yes sir.

Q And, so far as their form is concerned, they were in due
and proper form as was the customary practice of the De-
partment?

A Yes sir.

Q Did these vouchers for expenditures, and also the
payroll vouchers referred to in each of these accounts current
include these fraudulent checks, Exhibit A?

A Yes sir.

MR. McLaren : I now offer in evidence as plaintiff's
exhibit "C," the quarterly accounts current, as follows : Oc-
tober 1st, 1907, to December 31st, 1907 ; January 1st, 1908, to
March 31st, 1908; April 1st, to June 30th, 1908; July 1st,

1908, to September 30th, 1908; October 1st, 1908, to December
31st, 1908; January 1st, 1909, to March 31st, 1909; April 1st,

1909, to June 30th, 1909.

MR. McCORD: I object because they are incompetent, ir-
relevant and immaterial, and object to each of them as incom-
■ patent, irrelevant and immaterial.

Q Mr. McCoy, you sent in no quarterly account for the
period after June 30th, did you?

A No sir.

NATIONAL BANK OF COMMERCE. 159

Q The quarterly accouut was not yet due at the time you
were arrested, is that the reason?

A Yes sir.

Q Is there anything on the face of these quarterly ac-
counts, or upon the individual vouchers or payrolls vouchers
that indicates any irregularity, or that indicates the practice,
or I should say the fraudulent practice or scheme that you
w^ere carrying on?

MR. McCORD : I object to that as calling for the con-
clusion of the witness, that being the very thing that the jury
is to pass upon and I object on the further ground that it is
incompetent, irrelevant and immaterial.

Q State what that paper is?

A An account current.

Q For the period ending when?

A September 30th, 1907.
•Q Beginning July 1st, 1907?

A Yes sir.

Q Any fraudulent items included in that account current?

A There were.

Q None of them covered by these checks — I will change
the form of that question — Is that the usual form for the quar-
terly account that was in use?

A Yes sir.

Q Can you tell, from an examination of it, whether, or not
any of these items were improperly allowed?

A Not from an examination of this alone, I would have
to have the checks that correspond and then I could tell.

MR. McLaren : I offer plaintiff's exhibit ''D" a quarterly
account.

MR. McCORD : I object to it as incompetent, irrelevant and
immaterial and not properly identified.

Q You are living in Spokane, Mr. McCoy?

A Yes sir, I am.

160 UNITED STATES OF AMERICA VS.

CROSS-EXAMINATION by Mr. McCord.

Q How long did you say that you occupied the position of
examiner of surveys and special disbursing agent?

A I had the position of examiner of surveys for about nine
years, and during four or five years of that time I was sx)ecial
disbursing agent.

Q Prior to the time that you became special disbursing
agent, who attended to that duty of disbursing.

A I did the disbursing. I paid the expenses of the men
and rendered my account to the General Land Ofiice and was
reimbursed by check from the Interior Department.

Q Who advised you in the first instance?

A The Department advised me in the first instance, of
what was necessary.

Q You advanced your own money?

A Yes sir.

Q After that time you adopted the system —

MR. McLAEEN: You don't mean that he adopted the
system, the office adopted the system, of course.

Q After jou became disbursing agent and also examiner
of surveys, I will ask you where you maintained 3'our office, if
you had one?

A I had no office.

Q You attended to the surveys in Washington, Idaho and
Montana ?

A Yes sir.

Q Did the Government have any other agent, or assistant
but you in the transaction of this business?

A No sir.

Q Did they have any other person, or individual or agent
upon the ground to assist you in doing this work, or to check
your accounts?

A Do you mean, now, assistants who I employed myself?

Q Emploj'ed by the Government?

A Well they were employed by me for the Government.

NATIONAL BANK OF COMMERCE. 161

Q Who did you employ?

A My assistants in the field?

Q Yes sir.

A Well I supposed — I employed assistants to assist me in
making the examination of the surveys.

Q Did the Government employ any other men to aid you?

A No sir.

Q In checking your accounts as special disbursing agent
— Did the Government check your accounts?

A The Department have a special distributing agents —
their usual custom.

Q They sent men to Seattle to examine them or do it at
Washington ?

A At the General Land Office at Washington.

Q Were they out here, at any time, by any body?

A Not that I am aware of.

Q How did they detect your fraudulent scheme?

A Mr. Good, I forget his initials, a special agent of the
Land Office discovered it there in Montana.

Q You were not checked up in your field work, or in your
agents work by any body until shortly before you were arrested
during the whole period of time that you were in the service
of the Government, is that right?

A That is right.

Q How many surveys did you attend to — about, in a gen-
eral way, about how much money did you expend legitimately
in the service of the Government between 1900 and 1909?

MR. McLaren : I object as incompetent and irrelevant.

A I don't remember.

Q Give it to me approximately?

A Without looking up the records, I could not say.

162 UNITED STATES OF AMERICA VS.

MR. McLAREK : I make the same objection,

A Well I could not approximate it without looking over
my—

Q Well about how much business were you doing- — You
can tell about how much you would do in a year — I am not
trying to trap you into anything?

A If I could give you an approximate statement, I would
gladly do so, but without going over the records, I don't see
how I could do so.

Q As much as five thousand dollars?

A No sir.

Q One-half of that, twenty-five hundred dollars?

A No sir, nothing like that.

Q One thousand a year, would you say?

A The very outside limit would be one thousand dollars,
I should say.

Q At any time, did the Government send any one else, so
far as you know, to check up your work and see whether this
money had been legitimately expended?

A No sir.

Q You have misunderstood the question, Mr. McCoy, have
you not?

A It is only a surmise on my part, but I think there was
a survey over in the extreme northeast part of Montana, over
which several claimants were in litigation and I think pos-
sibly that it was reported that I had not been on the ground
to make my examination.

Q What did this work consist of, examining r^f surveys?

Q The Government has public lands throughout these
states and they make surveys of them.

Q This is done by United States Deputy Surveyors?

A Yes sir.

Q For the Government?

A Yes sir.

Q What did you do?

A Before the Government would accept it, I was sent into

NATIONAL BANK OF COMMERCE. 163

the field to make an examination of the survey, whether it was
in acceptable form, whether it was correctly done.

Q Did you go out and run the lines over and resurvey it?

A I was to approximately ten per cent of the lines run
by the party.

Q As much as ten per cent?

A Yes sir.

Q You were supposed to hire assistants to do that?

A Yes sir.

Q Surveyors?

A Yes sir.

Q Now, Mr. McCoy, you have identified a bunch of checks
here, plaintiff's exhibit ''A," how do you know that these checks
are the ones that you issued fraudulently — How can you tell?

A By recognizing my handwriting.

Q Every one is a different one, is it not?

A Yes sir.

Q And each individual check has a different signature-
Do you mean to tell me that, from an examination of these
checks that you can tell which ones you forged and which ones
the signatures are legal?

MR. McLaren : I object, the question assumes that there
is a different payee for each check, which is not the case.

A I identify these from my own signature on the check.

Q When did you do that?

A At the time the check was issued.

Q ^A'hen this list — When these checks were selected out,
did 3'ou select them?

A No sir.

Q Who did?

A I couldn't tell you.

Q Did you go over the various checks that had been re-
turned, with anybody in Washington and assist liim in picking
the forged checks, that is those that you forged?
A No sir.
Q You did not?

164 UNITED STATES OF AMERICA VS.

A No sir.

Q. You have only made a cursory examination of these
cheeks today, have you not?

A Yes sir.

Q You have not taken up each one individually and gone
through them?

A Yes sir, each check.

Q Have you examined the signature on each one?

A Yes sir.

Q I would just like to have you tell me how you can re-
member five years after each one of these was taken which are
genuine and which are not?

A Well I know that, during the time that these were issued,
that I issued nothing but fraudulent checks.

Q Did you issue, at any time during the period from 1907
to 1909, anything but fraudulent checks — You don't mean that?

A Xone except those that were payable to myself.

Q From 1907 to 1909 you did nothing then — you did not
issue a single check that was valid?

A Except those to myself.

Q Except the two hundred and seventy dollars a month?

A Yes sir my salary.

Q Everything else was fraudulent?

A Y^es sir.

Q You did no work?

A I was doing work, but instead of passing checks to the
parties that I employed in the field, I would pay them per-
sonally.

Q How much did you pay out in that way?

A I am unable to state.

Q About how much would these checks amount to, fifteen
thousand dollars, about how much did you expend out of your
own funds?

A I don't think I could even approximate it.

Q Would 3^ou say that you had expended five thousand,
one-third of that?

NATIONAL BANK OF COMMERCE. 105

A No sir.

Q About four thousand dollars?

A About a couple of thousand dollars.

Q You have no way of arriving at that estimate?

A No sir, I have no records.

Q You think that you have spent about a couple of thou-
sand, or it may be more?

A It may be more or it may be less.

Q It may have been as high as five thousand dollars?

A I don't think it was a high as five thousand.

Q As much as four thousand?

A I don't think it was as high as five thousand.

Q What were you doing — You say that you paid some men
for services rendered, and that you paid it out of your own
money — Do you know of any of the men that you paid it to?

A No sir, I do not.

Q Can't you recall any of them?

A No sir.

Q What work did they do for which you paid them?

A Some were chainmen and some were flagmen and some
were teamsters and some of them were stage drivers and some
of them livery stable people.

Q You did go over onto the different surveys, during the
period from 1907 to 1909, to September, 1909, you did carry on
the checking of these surveys?

A Only a part of them. I did a few of them.

Q You were on all of them, were you not, with the excep-
tion of the one in northern Montana?

A No sir.

Q How many all together?

A I am unable to approximate. The records of the office
will show, and I could not even approximate without having
those records.

Q You made up reports on these various surveys and sent
them in to the Government?

A Yes sir.

166 UNITED STATES OF AMERICA VS.

Q These reports showed that you had run the lines on at
least ten per cent of the surveys, the deputy surveyor's work?

A Yes sir.

Q Is that right?

A Yes sir.

Q You mean to be understood that you did run ten per
cent ?

A Yes sir.

Q On some you did not run quite ten per cent?

A I only mean to approximate it.

Q You actualh' did the work of about ten per cent of the
most of them ?

A No sir, on a few of them.

Q On others you did part of the work and certified that
you did it all?

A Yes sir.

Q On all of them, with the exception of in northern Mon-
tana, you did some work?

A No sir.

Q What others?

A Well in quite a majority I did not examine in the field
at all.

Q Didn't do any field work at all?

A No sir.

Q You had nobody do it?

A No sir.

Q You cannot tell now a single man who worked for you,
that you paid, between 1907 and 1909?

A No sir, not a single man.

Q Not a single man?

A No sir.

Q Where did you keep this money, at Seattle?

A No sir, on the ground. That is, wherever' I happened
to be making examinations of surveys.

Q What sort of a report would you send in with the
vouchers, would you draw a plat showing the sur^'ey?

NATIONAL BANK OF COMMERCE. 167

A No sir, I would send in the field notes covering the

ground.

Q You would send in the field notes you had gotten from

the deputy surveyor's work?

A I didn't get them from the deputy surveyor, I got them
from the Surveyor General's office.

Q You used the same notes in sending them in?

A Yes sir.

Q If you had done the work individually, they would not
have checked with the work in the Surveyor General's office,
would they— If you had made these surveys and run your
own lines, it would not have checked correctly with the work
in the Surveyor General's office, would it?

A No sir.

Q In checking, did you simply try to run over the lines
made by the deputy surveyor on the ground and find his monu-
ments?

A Yes sir.

Q xlnd during this time, a period of two years, you simply
copied the notes from the Surveyor General's office?

A They were not copied, they were faked, we made our—

Q They were taken from the Surveyor General's office?

A The only data we had was taken from the Surveyor
GeneraFs office.

Q They were reproductions of his notes?

A No sir.

Q You vv-ent to the Surveyor General's office and copied

them ?

A Yes sir.

Q Copied them as they were shown in his office?

A No sir, but I would not send in notes unless they would
correspond in a general way.

Q You would modify them in some way?

A Yes sir.

Q Well now then how did you do when you actually re-
run the lines, did you try to make changes in them?

168 UNITED STATES OF AMERICA VS.

A No, I would return the conditions as I found them. I
would take my own field notes and my reports would be exact
copies of my own field notes.

Q Wherever jou found the monuments made by the sur-
veyor, in those cases the notes would be identical, but in those
notes that you faked from the notes in the Surveyor General's
office —

A So far as the monuments and as to the topography they
were not the same.

Q When you faked the notes you were not the same?

A It is seldom that any two men write up the same notes
after going over a certain line.

Q Now then these checks that you draw, where did you
cash them, Mr. McCoy?

A At different places around over the country,

Q Tell me how you would do it, take the first check for
Albert Peterson, for twenty dollars —

A May I see the check, please.

(Exhibit "A" shown witness.)

Q The one on the top there, the back of the check shows —

A That I cashed it through the National Bank, or the
Columbia Valley Bank of W^enatchee.

Q Did you take it in there yourself?

A No sir.

Q How did you arrange that?

A I sent these checks to this bank, under the name of
J. D. King.

ME. McLaren : You mean this particular check, you
didn't send all of them? A This particular check.

Q J. D. King, who was he?

A A fictitious name, the same as the rest. I sent these
checks to the Columbia Valley Bank in the name of J. D. King.

Q By mail?

A Yes sir.

Q From where?

A From the points, I don't remember now.

NATIONAL BANK OF COMMERCE. 169

Q Did the bank send these checks —

A I opened up an account with the bank and sent these
checks for collection.

Q You opened up an account in the first place?

A On this particular check as J. D. King.

Q Did you go there to open it?

A No sir, by mail. I sent these checks by mail in the first
place.

Q You opened an account by mail?

A Y"es sir.

Q Then you checked it out in the same name?

A Yes sir.

Q You forged the name of King to these checks?

A Y''es sir.

Q How did you get the money — How did they send it to
you?

A Then this was checked out in my favor by this man

J. D. King, this fictitious King.

Q You cashed the checks in that way and sent to you
by mail?

A Yes sir.

Q Were you ever in the Seattle National Bank?

A Yes sir.

Q Do you remember of any checks paid by them?

A Y^es sir.

Q How did you manage that?

A Under the name of F. M. Clark.

Q Did you open an account under that name?

A Yes sir.

Q Y^ou went in personally?

A Yes sir.

Q You would go in there and deposit them yourself?

A Y^es sir.

Q From time to time?

A Yes sir.

Q And then check them out?

170 UNITED STATES OF AMERICA VS.

A Yes sir.

Q How about the Mutual National Bank, liow did you

manage that?

A That was done by mail, under another name.

Q Where from?

A From some part of Montana, wherever I happened to
be. I was at different points in Montana.

Q Would you send more than one check at a time?

A Yes sir. I would generally send the bunch for the
month.

Q And have them placed to your account?

A Y^es sir, to the account of these fictitious names.

Q King?

A Yes sir, or Clark.

Q Did you have more than one fictitious name?

A Yes sir, the first was J. D. King.

Q How may accounts did you have with the various banks
— Y^ou had one under the name of J. D. King and one Clark,
and what else?

A That is all.

Q And this was done under these two names?

A Yes sir, as I remember.

Q Then you would forge the name of King on the check
and make it payable to your order?

A Yes sir.

Q Y^ou didn't go and draw the money yourself?

A No sir. It was sent by draft to me at Seattle and I
would check it out from wherever I would happen to be.

Q When did you open the account with the National Bank
of Commerce, or did you open it?

A The National Bank of Commerce, I opened an account
there when they adopted this disbursing agent system.

Q Did you have the opening of the account yourself, or
was it done from Washington?

A The deposit was made there from Washington, and I
was notified of the fact.

NATIONAL BANK OF COMTJERCE. 17J

Q The deposit was made from Washington?

A To my credit.

Q As M. P. McCoy, Special Disbursing Agent?

A Yes sir.

Q This was how the account was opened uf)?

A Yes sir.

Q You were directed to go there and leave your signature?

A Yes sir.

Q You went there and left your signature?

A Yes sir.

Q And you drew your money out of that account for
various purposes connected with the Government?

A Yes sir.

Q Some that were legitimate, and some that were not,
that is right, is it not?

A I checked that money out through other banks.

Q What—

A That is on checks cashed in other banks.

Q You drew checks?

A Yes sir and cashed the checks.

Q Every one of these checks contains your genuine signa-
ture?

A Yes sir.

Q And all of these in this bunch, to the best of your knowl-
edge, are fictitious?

A Yes sir.

Q Is there anything on the face of these checks to advise
or indicate the fact that there was anything fraudulent about
them, was there?

MR. McLaren : which bank, the National Bank of
Commerce?

A No sir, they are regular in every way.

Q The contents and endorsements are what the law re-
quired to be put upon them ?

MR. McLaren : I object as calling for a conclusion.

172 UNITED STATES OF AMERICA VS.

Q That is you have a i^ay-roll all proper for each draft
forged ?

A Yes sir.

Q That is on all of them?

A Yes sir.

Q Did Tou put the — I notice some of them have a
voucher, number one voucher from the 6th to the 16th, you
showed these vouchers to the bank, did you?

A No sir these vouchers were sent with my quarterly
report to the land office at Washington.

Q You put in these all of the pay-rolls and sustenance
and so on — I notice that some of them, or at least I thought
some of them had no — did not have vouchers on them?

A The last ones, several of them are there not.

Q Some of these in April — in August, 1909, examine these
for August, 1909, did you put notations of the purpose for
which they were issued?

A No sir, it seems to have been left out.

Q Why was that?

A Well I don't remember why, an oversight on my part,
I guess.

Q I will show you some in January, 1908 —

A 1909 I suppose it is.

Q January, 1909, March, 1909, July, 1909, May, 1909, and
June, 1909, examine these i^lease — those do not seem to have
any?

A These were after the adoption of the pay-roll system
and the aggregate amount of these checks have been referred
to in one voucher. The checks were referred to hj number
of the voucher rather than on the checks.

Q Did you exhibit your pay-rolls to the bank?

A No sir.

NATIONAL BANK OF COMMERCE. 173

August 31, 1909, for sixty-two dollars, in fact all of these for
August, with the exception of one or two seem to have beeu
dr^awn direct without the interventiou of any other bank, were
they not?

A No sir, these were paid through the Seattle National
Bank and are stamped indistinctly on the back of them there.

Q The}^ were paid through the Seattle National Bank?

A Yes sir.

Q Now you referred to your instructions a while ago,
from the Government, they authorized you, when this deposit
was put there to sign checks for this money in drawing it out,
did it not?

A Yes sir.

Q You had authority from them to draw checks?

A Yes sir.

Q You sliowed that authority to the bank, I presume, you
must have, did 3^ou not?

A Yes sir, I showed my letter of instructions to Mr. Max-
well, who was at that time cashier of the bank.

Q And these instructions that you got, you just exhibited
them to him did you not?

A Yes sir.

Q You didn't give him any other instructions?

A No sir.

Q Just let him read your instructions?

A Yes sir.

Q The bank had no other instructions, except from reading
your letter?

A I don't know, but I presume —

Q I don't want any of joiiv presumptions — You don't
know ?

A I don't know. That letter instructed me to sign checks
as Special Disbursing Agent.

Q No limitation was placed by that letter, or was placed
on the bank by that letter, to paying any checks signed by you?

A No sir.

174 UNITED STATES OF AMERICA VS.

Q There were no conditions, it had been remitted direct
to the bank to take your signature, and directing 3^ou to draw
it out upon your signature, that was the size of these instruc-
tions, was it not?

A Yes sir, the purport of them.

Q That is the substance?

A I don't remember the wording exactly, but that is the
substance or object of the letter.

Q To advise the bank that you had authority to draw any
money placed to your credit as Special Disbursing Agent?

A Yes sir.

Q Now the bank, every month, rendered you a statement
of your account, did it not?

A Yes sir.

Q And the vouchers, or the checks that you had used
were not returned to you?

A No sir.

Q A list of them was returned to you in a statement of
account?

A Yes sir.

Q Also the vouchers themselves and a statement were sent
to the Department at Washington by the bank — That is the
checks were sent to Washington?

A I don't know.

Q You don't know what the custom was?

A I presume they were but I had no means of knowing.

Q Your account was balanced up every month?

A Every quarter, yes sir.

Q Every month?

A No sir.

Q Was it every quarter?

A Every quarter.

Q The cancelled checks were sent to Washington — You un-
derstand that it is customary to send them to Washington?

A Yes sir, I do now.

NATIONAL BANK OF COMMERCE. 175

Q These checks, so far as you know, were all sent to Wash-
ington at least every three months?

A Yes sir, I preKSume they were.

Q So that Yonr account was balanced up every month be-
tween you and the bank?

A Yes sir.

Q The bank rendered you a statement every month?

A Yes sir.

Q They didn't wait until the end of the quarter, but ren-
dered it every month to you?

A Yes sir.

Q They didn't render any to the Department at Wash-
ington?

A I don't know, I am sure.

Q Did the Government, prior to September, 1909, ever
make any complaint or criticism of your acts or your dealings
with the Government in regard to these examinations of
surveys?

A No sir.

Q They never offered any criticism at all of any kind?

Q As I understand it, you sent in until October, 1908, you
sent in to the Department at Washington vouchers for every-
thing that you expended?

A Yes sir.

Q Purporting to be signed by the men who had done the
work or furnished the supplies?

A Yes sir.

Q That is true, is it not?

A Yes sir.

Q These were sent in monthly, were they not?

A Prior to the adoption of the Special Disbursing Agent,
yes sir.

176 UNITED STATES OF AMERICA VS.

Q After the adoption of the Special Disbursing Agent
scheme, they were sent how often?

A Quarterly.

Q When was the disbursing agency feature adopted?

A I think after the first of October, 1908. That is when
we began.

Q After the account was opened up in the bank in your
name as Special Disbursing Agent and as Examiner of Sur-
veys, from that time you sent in your vouchers quarterly?

A Yes sir.

Q And continued to do that until October, 1908, did you?

A I continued to do that until my arrest in 1909, Sep-
tember, 1909.

Q You sent in the vouchers, as well as the pay-rolls?

A No sir, sent in the pay-rolls after we adopted that plan.

Q October, 1908?

A Yes sir, prior to that time sent in vouchers.

Q You continued to send in pay-rolls quarterly after Oc-
tober, 1908?

A Yes sir.

Q So that throughout the whole history of these transac-
tions, from the time you opened the account in the Bank of
Commerce, until you were arrested, you sent in, every three
months, vouchers for every dollar you claim to have expended?

A Yes sir.

Q These vouchers were used until October, 1908?

A Y'es sir.

Q After October, 1908, the labor and services went in
under the pay-roll?

A Yes sir.

Q You continued to have each member of the pay-roll
sign that voucher?

A Yes sir.

Q They signed the pay-roll, each member that you claimed
pay for services?

A They signed the pay-roll, yes sir.

NATIONAL BANK OF COMMERCE. 177

Q Other services were on independent vouchers?
A Yes sir.

Q That was up to the time of your arrest?
A Yes sir.

Q The Government, at all times then, from 1907 up until
the time of your arrest on September 1st, 1909, had these
vouchers in its possession?
A Yes sir.

Q Now the Government could, very easily, by sending
men out to check up the ground work and field work have as-
certained that you had never been over it, could they not?
A Yes sir.

Q xVnd that is the way that they finally stumbled onto the
illegal practice?
A Yes sir.

Q Or it was an easy matter, was it not, to have found out
from the people in the vicinity that you had not done this
work, was it not Mr. McCoy?

A Except in the sparsely settled districts.
Q If they had made any investigation at all, or if they had
enquired for any of these men you claim to have paid money
to, they could have ascertained that the men could not have
been produced?
A Yes sir.

Q So that by the simplest sort of an investigation they
could have found out that there were no such people in exist-
ence as those whose names you had given?
A Yes sir.

Q Did they ever inquire from you, as to the men who com-
posed these accounts, as to their residence or postoffice address
of any of these individuals to whom you claim to have paid
money ?

A I think each voucher shows the postoffice address of
each man who signed the voucher.

Q And all of these were fictitious and there was no such
person at that place?

178 UNITED STATES OF AMERICA VS.

A No sir.

Q And a letter addressed to them would have been re-
turned uncalled for?

A Yes sir.

Q I don't want to embarrass you, Mr. MeCo^^, but I want
to ask 3^ou the question because I think it is necessary — When
were you arrested and where?

A It was about the first of September, 1909.

Q Where were you arrested?

A At the Lincoln Hotel at Seattle.

Q With what offense were you charged?

A The offense of embezzlement of Government funds.

Q Of what particular embezzlement were you charged
with?

A I don't remember.

MR. McLaren : I will stipulate that he was indicted,
arrested and sentenced for embezzlement covered by the checks
shown in Exhibit "A."

Q Do you know what particular checks made up those
you were arrested for embezzling on? What the particular
funds were?

A I don't remember, I was rather embarrassed at the
time the indictment was read to me, and I don't remember.

Q You were vsentenced in Seattle?

A In Tacoma.

Q Were you tried?

A No sir.

Q You pleaded guilty to the indictment and you say that
you don't know what was in it?

A No sir, I don't remember now.

Q You are now out on parol?

A No sir, I am at liberty, my parol expired on the 19th
of last month.

Q ^o you are completely freed?

A Yes sir.

Q You are not pardoned?

NATIONAL BANK OF COINI MERGE. 179

A No sir.

Q So that Your civil rights have not been restored?

A No sir.

Q Did jou not make anv application in person?

A No sir. I made an application for a parol and it was
granted.

Q Mr. McCoy I will have to go into this a little more
in detail, as I don't know how all of these different names
here, that is the names of H. M. Benson, A. C. Jenkins, Charles
Paine, George K. Cooper, E. M. Bassett, Joe Mikel, A. J.
Whitney, F. W. McCuUey, George D. Cook, F. M. Clark and
J. D. King, all covering the month of August, 1909, I want
you to tell me, if you can, how you can go through tliose and
tell now, after the elapsing of five years, which ones of these
signatures are fraudulent, and which are not, or that all of
them are — I ask you whether you can do that from any in-
dependent examination of the signatures, as they now appear,
or can you tell only because you were not doing any work
during this period of time?

A I could not identify these from these fictitious signa-
tures, but I can identify them from my own signature having
issued the checks.

Q Well your signature does not appear on any of those
checks — that is the signature of M. P. McCoy, except as the
drawer of the check?

A That is all.

Q Can you independently say that all of these names
placed on these checks and made by you, can you tell now
from an examination of those signatures at this time — 1 don't
see how it is possible — Tell me whether if you didn't have
these passed up to you, and without any other information,
whether you could tell whether these were forgeries?

A No sir, it would be impossible for me to tell.

Q If you saw the checks you could not tell that they were
forgeries, except, as you say, between 1907 and 1909, you say
that you did not issue any legitimate checks?

180 UNITED STATES OF AMERICA VS.

A Yes sir.

Q That is the only way you can tell?

A Yes sir.

Q That is also true of the vouchers, is it not, you could
not tell that these were forgeries on the vouchers from an in-
spection of the vouchers at this time?

A Yes sir.

Q How?

A Simply by knowing that they were fraudulent.

Q I say by an examination of the voucher itself, inde-
pendent of your personal knowledge, you could not tell, it
would be an impossibility?

A No sir.

Q Now, Mr. McCoy, are you not mistaken in saying that,
from 1907, the date of the first of these checks, October 14,
1907, to September 30, 1909, two years that you did not issue
a single genuine check?

A Not as against the National Bank of Commerce.

Q How do you know that? You transacted business ana
had men in your employ, and were paying them from some
source or other, now is it not possible that some of these checks
that you drew were payable for a legitimate purpose and to
the men who earned the money?

A No sir.

Q Why do you say that?

A Because whenever I incurred expenses in the field I
paid it to the individuals themselves, and in order to carry
this thing through I would, issue checks against the National
Bank of Commerce but only those that were fictitious.

Q What work were you doing from October, 1907, to
September 30, 1909, what particular surveys were you ex-
amining?

A Surveys in the states of Washington, Idaho, and Mon-
tana. The records would show the title of each survey that
is to whom contracts were let, but who they were now, I can-
not recollect.

NATIONAL BANK OF COMMERCE. 181

Q You are sure that you never drew auy checks iu their
favor on the National Bank of Commerce?

A I am sure of that.

Q But you used the money that you got from the National
Bank of Commerce in paying them?

A Yes sir, except those payable to myself.

Q The money that you got on these fraudulent checks you
used, in part, to pay these men?

A Yes sir.

Q How much you have no means of knowing?

A No sir.

Q Otherwise that it is from one to four thousand dollars?

A Yes sir, somewhere within those sums.

Q But you did render services to the Government, valu-
able services, during that period, did you not in examining these
surveys?

A Yes sir.

Q And employed men to assist you in getting the infor-
mation you did furnish the Government?

A Yes sir.

Q And you did have men employed by you in examining
surveys for the Government?

A Yes sir.

Q I would like to— If you can give me some more cor-
rect information as to the amount of money you spent on each
particular survey, the number of men you would employ and
I would like to have you try to recall, Mr. McCoy, about how
much money you spent legitimately from 1907 to 1900, that you
paid for out of funds that you carried in this bank?

MR. McLaren : Q is it your testimony, Mr. McCoy,
that the actual services which you did pay for during this
period, were paid out of these fraudulent checks, or did you
put in a personal check to pay for these services? A I got
this money individually.

Q Out of the proceeds of your personal checks?
A I paid them with my own money.

182 UNITED STATEvS OF AMERICA VS.

Q I want to get this clear — During the time that these
fraudulent checks were sent in by you, you also sent in checks
payable to yourself for different amounts, did you not?

A Yes sir.

Q Was it out of these checks, payable to yourself, that
you paid the men that you had employed, or did you pay these
men out of the proceeds of these fraudulent checks?

A I paid them with my own money. How I obtained that
money, I obtained part of it by my own salary and overtime
and part of the money I got from the fraudulent checks.

Q You kept all of this money in the bank?

A Yes sir.

Q The National Bank of Commerce?

A Yes sir.

Q When you got money from these fraudulent checks and
legitimate money, you put them all together in one account?

A Y^es sir.

Q AVhether it was from one source or the other, part was
from fraudulent sources and part from other sources?

A Yes sir.

Q You could not tell which?

A Xo sir.

Q You have no doubt but that you paid out from one to
four thousand dollars for the Government in this way?

A Yes sir.

Q Most of it came from the fraudulent checks, because
there were more of them?

A Yes sir.

Q So that you would say that the biggest part of what
you did pay necessarily came from the money that you got
on these fraudulent checks, that is the legitimate conclusion,
is it not?

A Well the amount was so small that I was paying out,
compared with what I was getting in, that I would not have
any means of knowing where it did come from.

Q It was all mixed together?

NATIONAL BANK OF C0M:MERCE. 183

A Yes sir.

Q The monej which you did use to pay these legitimate
expenses and labor was money paid out of your own personal
bank account into which you had put the money realized from
these fraudulent checks?

A Yes sir.

Q That is right, is it not?

A Y^es sir.

Q :N'ow take, for instance, the surveys for the year 1907,
can you tell where you examined one — just recollect one where
you did any work on it?

A Without having the records before me, 1 could not tell
that.

Q It is possible, is it not, that you have paid out more
than four thousand dollars?

A No sir, I should not estimate it any higher than that.

Q You think that four thousand is the maximum?

A Y^es sir.

Q Would you consider that approximately the sum?

A I should say a couple of thousand. It might have been
more or it might have been less.

Q It might have been as much as four thousand?

A It might have been over two thousand.

Q The last one of these vouchers was sent on September

30, 1907?

A Xo sir the last one went in —

Q June 30, 1909?

A Yes sir, June 30, 1909.

Q You didn't send in any after that?

A No sir.

Q But you drew quite a number of checks after that did

you not?

A Yes sir, I drew checks at the end of July and to the

end of August.

Q Did you keep any account in any other bank than the
National Bank of Commerce as Special Disbursing Agent?

184 UNITED STATES OF AMERICA VS.

A No sir,

Q Did the Government not receipt to jou for these various
accounts that you sent in?

A No sir, it was not their practice, but they did, however,
at the end of the year send me a statement from the auditor of
the interior department of my account and including the ac-
count for the past year,

Q They verified your account at the end of 1907, did they?

A Yes sir.

Q And verified it at the end of 1908?

A Yes sir.

Q Tell you it was correct?

Q What officer of the National Bank of Commerce did you
do your business with, Mr, Maxwell?

A It was the young man who had charge of the disburs-
ing of the Government funds in the rear of the office, I don't
remember his name, in fact I never knew his name. He was
one of the bank tellers.

Q Ever do business with Mr. Backus?

A No sir.

Q Did you ever do business with Mr. Stacey?

A No sir.

Q Did 30U ever do any business with Mr. Seewell?

A No sir.

Q Mr. Maxwell, you did show him your credentials?
A Yes sir.

Q Did you turn your signature over as Special Disbursing
Agent?

A Yes sir.

NATIONAL BANK OF COMMERCE. 185

Q And your written instructions were to show your orders
to the bank, were they?

A I cannot recall exactly, but I was notified of this sum
being jjlaced to my credit in this bank.

Q You were authorized to draw it out on your signature?

A Yes sir.

Q You showed that to the bank?

A Yes sir.

Q You didn't tell them anything about your being unlim-
ited in your power to draw that money?

A No sir, I simply showed them my letter.

Q The letter didn't contain any limitation on your
powers ?

A No sir.

Q It was an unconditional authority.

A Yes sir, I think the checks were to be signed by myself
as Special Disbursing Agent.

Q With that exception there was no limitation?

A No sir.

Q There was no limitation on the authority of the bank
to pay you money?

A No sir. The letter gave me authority to draw it out
myself on my own order, but I don't think I could have drawn
any checks under that authority payable to myself.

Q It didn't say anything about it at all?

A Well I was to draw this money as Special Disbursing
Agent and I don't remember that it limited me at all.

Q You don't think that anything was stated as to any
limitation at all?

A I don't think that there was any limitation stated.

Q When you say that you don't think that you could draw
checks in favor of your own order, you are getting that from
information other than that contained in the letter?

A Y"es sir.

Q There was nothing in the contents of that letter that
indicated that you could not draw it in your own favor?
A No sir, not that I can remember.

186 UNITED STATES OF AMERICA A^S.

RE-DIRECT EXAMINATION by Mr. McLaren.

Q When were you paroled out Mr. McCoy?

A March 15th, last,

Q March 15, 1911?

A Yes sir.

Q You have been steadily employed in the City of Spokane
for how long?

A Since June 15th.

Q For what firm?

A W. A. Richards, architects.

Q Since when?

A June 15, 1911.

Q You have never had any diificulty or trouble with the
Government before this transaction of the fraudulent checks
during all the time you worked?

A I never had any trouble with anybody, the Government,
or anybody else.

Q Under your authority from the Government, you had
no authority to pay out money, or draw checks against the
account, except in payment of legitimate bills?

MR. McCORD : I object as incompetent, irrelevant and
immaterial and asking for an interpretation of a question of
law by the witness.

MR. McLaren : It is the same thing that you have gone
into.

MR. McCORD : I didn't, I asked him about the contents
of the letter.

Q When 30U told Mr. McCord that your letter of instruc-
tions, which you showed to the bank authorized you to draw
checks against the funds without any condition, you didn't
mean, did you that you were authorized by the Government,
by that letter, to draw any checks, except in payment of bills?

MR. McCORD : I object to that as calling for a conclusion
of the witness, seeking for an interpretation of the law upon
the very question at issue here and the witness not qualified to
answer it, and incompetent, irrelevant and immaterial.

NATIONAL BANK OF COMMERCE. 187

Q Was that jouv understanding, Mr. McCoy?

A I hardly know how to answer that. I cannot say that
I really understand the question.

Q You didn't mean, in answer to Mr. McCord's question
to say that you were given authority to draw these checks,
Exhibit A?

MR. McCORD : I object as it is calling for a conclusion of
the witness and a legal opinion and asking for something that
requires expert knowledge and that would require legal knowl-
edge in the judge and jury and the very question at issue in
this case.

MR. McLAREX : The question is withdrawn.

Q During the time covered by these checks, you were not
doing much of any work — Were you doing anything in April,
1908, do you recollect being over at Great Falls, Montana?

A I don't remember anything specially.

Q I hand you four vouchers, numbered fifteen, sixteen,
seventeen and eighteen, commencing April, 1908, to J. D. King,
A. M. Anderson, F. M. Clark and Fred Evans, state whether
these were fraudulent?

A Yes sir.

Q You received the money on these vouchers?

A Yes sir.

MR. McLaren : I offer in evidence plaintiff's exhibit
"E" (Vouchers Nos. 15, 16, 17, 18).

MR. McCORD: I object as incompetent, irrelevant and
immaterial, not involved in this case as counsel has stated.

Q I hand you voucher for November, to yourself, for two
hundred and seventy dollars — Can you state whether or not
you worked during that month of November, 1907?

MR. McCORD : I object as immaterial.

A No sir.

Q I hand you voucher for December, 1907, Great Falls,
Montana, two hundred and seventy-nine dollars, to yourself,
do you remember whether you rendered any services in that
month?

188 UNITED STATES OF AMERICA VS.

MK. McCORD : I object to it as immaterial.

A I don't remember.

Q Did you get the money on these two vouchers, payable
to yourself?

A Yes sir.

MR. McLAREX : I offer in evidence Plaintiff's Exhibit F
(Vouchers Nov. and Dec, 1907, favor of witness).

MR. McCORD: I object to them as incompetent, irrele-
vant and immaterial.

Q Now I hand you a certificate, signed by yourself, for the
month of April, 1908, and I will ask you, if, on the first page
of this, that is your signature "M. P. McCoy, Examiner of
Surveys?"

A Yes sir.

Q Calling your attention to the item of disbursements,
as shown by that itemized statement, and calling your further
attention to page two, to a certain entry of expenditures, under
date of April 8th. "To J. J. Carlton, Darby, Montana, for
hire two horses and buggy, with driver, expenses, etc., eighteen
dollars, is that part of a voucher that you returned under that
heading?

A It is.

Q Calling your attention to the second portion, marked
page three, under date of April 30th, 1908, "To J. D. King,
Great Falls, Montana, for services as chainman, from April
19 to 30 inclusive, twelve days, twenty-four dollars," is that the
same J. D. King the fictitious person?

A Yes sir.

Q To F. M. Clark, Great Falls, Montana, services as chain-
man, twelve days, two dollars, twenty-four dollars, is that the
same fictitious person?

A Y"es sir.

NATIONAL BANK OF COMMERCE. 189

A Yes sir.

Q Calling your atteiition to page two of this itemized
statement, April 21st, "To J. L. Murray, Helena, Montana,
for board and lodging assistants J. D. King and F. M. Clark
April 21, four dollars." Those are fictitious persons are they?

A Yes sir.

Q Ray Jones, Great Falls, Montana, for board and lodg-
ing assistants J. D. King and F. M. Clark April 22nd, three
dollars," that is fictitious, is it not?

A Yes sir.

MR. McLaren : Plaintiff offers exhibit '^G" Certificate
of M. P. McCoy, during the month of April, 1908, consisting of
two separate parts.

MR. McCORD: I object, incompetent, irrelevant and im-
material.

Q You testified a while ago that during this period cov-
ered by the fraudulent checks, you were doing some work, is
that true?

A Yes sir.

Q That is on different surveys?

A Yes sir.

Q You also testified that you had paid these men money,
did you employ the cash which you received on your own

checks?

A Yes sir, I paid them in cash.

Q You testified further that you thought that the cash
might have been from the proceeds of these fraudulent checks?

A Possibly, I mean, that is all.

Q Is it not true, as shown by the statement in Exhibit
"G," which I have just shown you, that you had also received
other money which you were not entitled to and which you
didn't earn which is not covered by these checks?

A Yes sir.

Q When you say that possibly some real services may
have been paid out of these fraudulent checks, you don't know
whether it is true or not?

190 UNITED STATES OF AMERICA VS.

A Yes sir, I know it was true.

Q How much was there of it?

A Well I am unable to tell how much.

Q How can jou tell that it was not paid out of these
fraudulent checks?

A I cannot tell that it was out of these fraudulent checks,
but it was out of my monej^

Q You cannot tell that it was not paid out of these frau-
dulent checks?

A No sir, I paid it out of money that I obtained whether
it was from my salary, per diem or from these I cannot say.

Q Do you recall, Mr. McCoy, how the expenses covered
by these vouchers, for April, 1908, were paid to these fictitious
persons named in there — To refresh your recollection, I will
call your attention to the month of April, 1908, as to the frau-
dulent checks in this case, do you recollect how they were paid?

A That was done prior to my appointment as Special Dis-
bursing Agent.

Q In 1908, this is in April and the appointment was —

A I don't understand why this — During part of this year
1 was addressed as special agent of the General Land Office,
and I acted as special agent under instructions from the com-
missioner of the General Land Office, and during that time I
was examining applications for surveys for different people
around there over the different states in which I traveled and
during that time I was acting as special agent and not as dis-
bursing agent, and this month covers both, where I was acting
as special agent and also as examiner of surveys.

Q How about May, 1908?

A Yes sir.

Q How about March, 1908?

A Yes sir, the same way.

Q I will call your attention to the itemized report for
March, 1908, that is your signature M. P. McCoy, Examiner
of Surveys?

A Yes sir.

NATIONAL BANK OF COMMERCE. 191

Q Disbursements as shown by witliin itemized statement
and vouchers, one hundred and seventy-five dollars and twenty
cents, that is the amount of the items set forth on the inside
pages, is it not?

A Yes sir.

Q Is it not true, Mr. McCoy, that all of the actual ser-
vices which you did incur, during the period covered by the
fraudulent checks, were as a matter of fact itemized in your
various reports, sent in and paid by the Government's money,
either to you or to the persons whom you had hired by checks
outside of these fraudulent checks which you have before you?

A Yes sir.

Q Then it could not be possible, if this is correct, that
you paid for any of the actual services rendered out of the
fraudulent checks, that would not be possible?

A It is possible in this way, that I had money obtained
by fraud and also money obtained legitimatel}^ —

Q Is it not also true that all the money that you obtained
legitimately would be paid through vouchers and checks other
than these fraudulent ones?

A No sir.

Q Then why did you send in such a voucher as is shown
on March, 1908, and also in April, 1908?

A That is when I was acting as special agent for the Gen-
eral Land Office.

Q Not disbursing any?

A I was not disbursing anything, but I was paying my
railroad expenses and hotel bills.

Q During these two months is it not true that you put
in accounts for King and Clark —

A That was during the latter part of the month, April,
when I was acting as examiner of surveys.

Q I believe that you testified that you signed all of these
vouchers and reports shown in Exhibit B, as M. P. McCoy,
Examiner of Surveys?

A Yes sir.

192 UNITED STATES OF AMERICA VS.

Q Mr. McCoy in reference to your field notes, which you
say were faked, during the time that you were not actually
doing the work, as I understand your testimony in answer to
Mr. McCord, you modified the field notes of the Surveyor Gen-
eral so as to give them the appearance of being genuine?

A Yes sir.

RE-CROSS-EXAMINATION by Mr. McCord.

Q You say that these vouchers which you refer to. Exhibit
G, covering the months of March and April, 1908, that then
you were acting as special agent for the land department?

A During part of the time.

Q And in that case you rendered an account of the work
you did and received the money for it, did you?

A That is the way I remember it.

Q V>'el\ now then, how long did you act as special agent
of the department approximately?

A Well during each spring, for a month or two.

Q So that in 1908 and 1909 you were also acting as special
agent?

A Yes sir. No, excuse me, in 1909 I am under the im-
pression that I did not act as special agent.

Q During this whole time you draw two hundred and
seventy dollars a month, you were busy with government work
all the time yourself?

A Yes sir.

Q Do you consider that you earned the two hundred and
seventy dollars a month, yourself?

A No sir. I didn't when I was acting as special agent.

Q Part of the time you say you were — you had men em-
ployed doing legitimate work making surveys during the time
that you were entitled to your salar^^?

A Yes sir.

Q On most of them covering this early period, you yourself
were engaged, were you not, in tending to the work you were
having done, you said that you had quite a considerable work

NATIONAL BANK OF COMMERCE. 193

done in examining surveys and running lines and you were
employed by the Government and you were receiving money
from the Government at that time, were you not?

A Yes sir.

Q So that during most of your time you would consider
that you were fairly entitled to the money that you drew, two
hundred and seventy dollars per month?

A No sir, not during the last two years, I didn't consider
that I did.

Q They paid you your salary?

A Yes sir.

Q They never objected to paying it at any time, they never
raised any question about paying you?

A Yes sir, small ones.

Q They never sued you to recover it back?

A Not that I am aware of.

Q How long a time, Mr. McCoy, did you spend in the pene-
tentiary at McNeil's Island?

A A year and a half.

Q How long were you sentenced for?

A Three years.

Q You were paroled after about a year and a half?

A Yes sir.

RE-DIRECT EXAMINATION by Mr. McLaren

Q You have just testified, Mr. McCoy, that you received
your salary during all of that period and that the Government
didn't protest the payment of your salary — I presume that you
refer to your monthly vouchers which are shown in plaintiff's
exhibit "B"?

A Yes sir.

Q And which you have certified as being correct?

A Yes sir.

Q On these vouchers is the alleged residence of the ficti-
tious persons in each case, the place where they were supposed
to have been livins at that time?

194 UNITED STATES OF AMERICA VS.

A Yes sir.

Q You didn't do any work during the summer of 1909?

A No sir.

Q Did you ever do any work —

A Except early in tlie spring.

Q Can you tell approximately how many months pay you
had rendered services for during the period covered by the
vouchers you sent in — I don't mean exactly, but some where
nearly?

A No sir, I could not tell you that.

Q Can you tell by consulting the names and addresses, Mr.
McCoy?

A No sir, the only way I could tell it would be by having a
list of the surveys, but I could not tell it from any information
that I have here.

Q Could you tell from the Great Falls, Montana, —

A I was there mostly as special agent.

Q During the period covered by these checks, however?

A Yes sir.

Q There were no checks between January, 1908, and May,
1908, during the spring while you were examining these surveys
and not disbursing anj^?

A No sir.

IT IS STIPtTLATED between the counsel, for both of the
parties hereto, that they waive the reading of the testimony,
after being transcribed, by the witness; and also the signing
of the same by the witness, and hereby consent that the same
may be transcribed by the reporter, from his shorthand notes
taken, and, when so transcribed, may be certified by the Com-
missioner.

IT IS FURTHER STIPULATED that the said testimony,
when transcribed, may be returned to the Clerk of the above
entitled Court, with the certificate of the Notary or Commis-
sioner, before whom the same was taken, that it is a full, true
and correct transcript of the testimony of the witness, M. P.

NATIONAL BANK OF COMMERCE. 195

McCoj, and that be was duly sworn before taking of the
testimony.

The United States of America,
Eastern District of Washington,
State of Washington,
County of Spoliane — ss.

I, Denton M. Crow, United States Commissioner in and for
the Eastern District of Washington, do hereby certify that the
above named witness, M. P. McCoy, was by me first duly sworn
to tell the truth, the whole truth and nothing but the truth;
that his deposition was reduced to writing by H. G. Twomey, a
disinterested person, in the presence of the said witness; that
the foregoing is a full, true and correct transcript of the testi-
mony of the witness M. P. Coy and that the reading and signing
of the deposition was waived by stipulation contained herein.

That said deposition was taken, pursuant to the annexed
stipulation, at my office in the City of Spokane, Spokane
County, Washington, beginning at 2 P. M. of February 19, 1912,
and being completed on the same day ;

That the parties were represented at the taking of said depo-
sition by their respective counsel, as set forth ; that the several
exhibits recited were offered in evidence and marked as specially
noted in the foregoing deposition and that I am not counsel,
or a relative of either party, nor otherwise interested in the
event of this suit.
(Seal) DENTON M. CROW,

United States Commissioner.

Dated February 23, 1912.

196 UNITED STATES OF AMERICA VS.

United States District Courts Western District of Washington.
Northern Division.

UXITED STATES OF AMERICA,

Plaintiffs

vs.

"i^ No. 1933— C.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant, j

STIPULATION FOR TAKING DEPOSITION.

IT IS HEREBY STIPULATED between the parties liereto,
through their respective undersigned attorneys of record, that
the deposition of M. P. McCoy, a witness for the plaintiff, re-
siding at Spokane, State of Washington, may be taken upon
an open deposition upon examination by the plaintiff's attorney
and cross-examination of the defendant's attorneys by virtue of
this stipulation and without commission or other authority or
power by Denton M. Crow, United States Commissioner resid-
ing at said city of Spokane, on the 19th day of February, 1912,
commencing at the hour of two o'clock P. M., or as soon there-
after as the same may be commenced, and the taking of said
deposition may be adjourned from time to time to suit the con-
venience of said Commissioner and said witness, provided that
nothing herein contained shall unreasonably delay the trial of
this action.

The certificate of said Commissioner shall be sufficient proof
of his name and official character without other or further au-
thority; all formalities being hereby expressly waived.

Said deposition when taken shall be mailed by the said Com-
missioner to the Clerk of the above entitled Court, at Seattle,
King County, Washington, and may be read in evidence hj

NATIONAL BANK OF COMMERCE. 197

either party, subject to objection as to the competency, materi-
ality, or relevancy of the testimony set forth therein.
Dated this 16th day of February, 1912.

ELMER E. TODD,
United States Attorney.

w. G. McLaren,

Assistant United States Attorney.
KERR & McCORD,
Attorneys for Defendant.

Indorsed : In the District Court of the United States for
the Western District of Washington, Northern Division. The
United States of America, Plaintiff, vs. National Bank of Com-
merce of Seattle, Defendant. Deposition of M. P. McCoy, a
witness called by Plaintiff. Taken at Spokane, Washington, on
February 19, 1912, before Denton M. Crow, United States Com-
missioner for the Eastern District of Washington, Eastern
Division. Also exhibits A-G inclusive, filed with the said depo-
sition. Filed in the U. S. District Court, Western Dist. of
Washington, Feb. 26, 1912. A. W. Engle, Clerk. By S.
Deputy.

United States District Court, Western District of Washington.
Xorthern Dirision.

UNITED STATES OF AMERICA, ^

Plaintiff, 1
vs. j^ ^o. 1933—0.

NATIONAL BANK OF COMMERCE, j

Defendant. J

BILL OF EXCEPTIONS.

For the purpose of making the foregoing matters a part of
the record herein, I, Edward E. Cushman, Judge of the United

198 UNITED STATES OF AMERICA VS.

States District Court for the Western District of Washington,
now on this 29th day of August, 1912, and within the term of
this court during which the trial of the above entitled cause
was held, do hereby certify that this cause was tried before the
Honorable Cornelius H. Hanford, Judge of such court, with a
jury, as aforesaid; that said Cornelius H. Hanford has since
duly and regularly resigned said position as such Judge, which
said resignation has been duly and regularly accepted, and
that I am a Judge of the court in which the above entitled cause
was tried, holding such court; that the evidence in said cause
has been taken in stenographic notes, and that from said notes
and from the admissions of counsel herein, I am satisfied tliat I
am fully advised in the premises and can pass upon and allow a
true bill of exceptions herein; and that the time for filing and
serving said Bill of Exceptions having been enlarged and ex-
tended to and including the 31st day of August, 1912, by order
of this Court and pursuant to stipulation between the respec-
tive parties hereto.

I further certify that on this day came on for settlement
and certification the Bill of Exceptions in this cause, on the
proposed Bill of Exceptions of plaintiff ; counsel appearing for
both parties, and the defendant by its attorneys, Kerr and
McCord, agreeing that said proposed Bill of Exceptions and
the deposition and exhibits therein set forth or referred to or
hereto attached, be settled and certified as a true and correct
Bill of Exceptions in said cause;

And I further certify that having duly settled and hereby
settling and allowing the foregoing bill of exceptions in said
above entitled action, do hereby certify the same, and do hereby
certify that this Bill of Exceptions, together with the depo-
sition of ]\[. P. McCoy herewith, and the exhibits marked plain-
tiff's Exhibits "A", "G", "H", "J" and "K", and plaintiff's
rejected Exhibits "B", "C", "D", "E" and "F", therein set
forth, or referred to, or hereto attached contains all the evi-
dence, exhibits and other material facts, matters and proceed-
ings in said cause, not alreadj^ a part of the record therein.

NATIONAL BANK OF COMMERCE. 199

IN WITNESS WHEREOF, the undersigned has hereunto
set his hand with his title of office, at Seattle, in the Northern
Division of the Western District of Washington, this 29th day
of August, A. D. 1912.

EDWARD E. CUSHMAN,
District Judge of the United States for the Western

District of Washington.

Indorsed: Plaintiff's Proposed Bill of Exceptions. Filed
in the U. S. District Court, Western Dist. of Washington, Aug.
29, 1912. A. W. Engle, Clerk. By F. A. Simpkins, Deputy.

In the District Court of the United States for the Western
District of Washington. JSlorthern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

y No. 1933.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant. J

ORDER TO TRANSMIT ORIGINAL EXHIBITS.

Now on this 18th day of September, 1912, upon motion of
the United States Attorney, and for sufficient cause appearing,
it is ordered that the plaintiff's original Exhibits "A" and "G"
which were introduced in evidence on the trial of the above en-
titled cause and plaintiff's Exhibits "B", "C", "D", "E" and
"F", which were offered in evidence on the trial of the above
entitled cause, and rejected by the Court, be by the Clerk of
this Court forwarded to the United States Circuit Court of
Appeals for the Ninth Judicial Circuit, there to be inspected

200 UNITED STATES OP AMERICA VS.

and considered together with the transcript of the record on
appeal in this cause.

Dated at Tacoma as of the 29th day of August, 1912.

EDWARD E. CUSHMAN, Judge.

Indorsed : Order to Transmit Original Exhibits. Filed in
the U. S. District Court, Western Dist. of Washington, Aug.
29, 1912. A. W. Engle, Clerk. By F. A. Simpkins, Deputy.

United states District Court, Western District of Washington.
Northern Division .

UNITED STATES OF AMERICA,

Plaintiff,

vs.

No. 1933— C.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant. ,

CERTIFICATE.

I, E. E. Cushman, Judge of the above entitled court, hereby
certify that the accompanying documents are respectively
plaintiff's Exhibits "A" and "G" which were introduced in evi-
dence on the trial of the above entitled cause, and plaintiff's
Exhibits "B'', "C", "D", "E" and "F", which were offered in
evidence on the trial of the above entitled cause, and rejected
by the court, and are respectively the exhibits mentioned in the
bill of exceptions herewith, and of which tlie said exhibits here-
with form a part.

I further certify that the said original exhibits are herewith
transmitted to the United States Circuit Court of Appeals for
the Ninth Circuit on the appeal of the above entitled cause for
the reason that the alleged forger v of the instruments con-

NATIONAL BANK OF COMMERCE. 201

stituting said ijlaintiff's Exhibit "A" is an issue liereiu, and an
inspection of the said exhibit will be aidful to the said Circuit
Court of Appeals, and for the further reason that said exhibits
are difficult of reproduction.

Done in open court this 29th day of August, 1912.

EDWARD E. CUSHMAN,
United States District Judge, Western District

of Washington.

Indorsed: Certificate: Filed in the U. S. District Court,
Western Dist. of Washington. Aug. 29, 1912. A. W. Engle,
Clerk. B3^ F. A. Simpkins, Deputy.

United States District Court, Western District of Yfashington.
Northern Division.

UNITED STATES OF AMERICA,

Plaintiff y

vs.

I No. 1933— C.
NATIONAL BANK OF COMMERCE,

a Corporation,

Defendant.

ASSIGNMENT OF ERRORS.

The plaintiff in this action, in connection with its petition
for a writ of error, makes the following assignment of errors
which it avers occurred upon the trial of the cause, to-wit :

The Court erred in overruling plaintiff's demurrer to the
defendant's second affirmative defense.

II.

The Court erred in rejecting the evidence offered by the
plaintiff upon said trial in the following instances, to-wit :

202 UNITED STATES OF AMERICA VS.

A. lu rejecting portions of the evidence of M. P. McCoy,
given by deposition, which evidence was in substance as to the
arrangements had between said McCoy and the United States
relative to the payment by said McCoy of the bills he might
incur in the performance of his duties for the Government.

B. In excluding and rejecting plaintiff's Exhibit "B".

C. In rejecting portions of the evidence of M. P. McCoy,
given by deposition, which evidence was in substance that the
vouchers sent in by said McCoy to the Department were regular
and in the usual form and manner.

D. In excluding and rejecting plaintiff's Exhibit "C".

E. In rejecting and excluding portions of the evidence of
M. P. McCoy, given by deposition, which evidence Avas in sub-
stance whether or not there was anything on the fact of the
quarterly accounts or upon the individual vouchers or pay-rolls
indicating any irregularity or fraudulent practice.

F. In rejecting and excluding plaintiff's Exhibit "D".

G. In permitting said M. P. McCoy to testify upon cross-
examination regarding how much money he had expended
legitimately for the Government between the year 1900 and the
year 1909.

H. In permitting witness McCoy to testify upon cross-
examination in substance that his letter of instructions from
the Department advised the bank that he had authority to
draw any money placed to his credit with the defendant bank
as Special Disbursing Agent

I. In permitting witness McCoy to testify upon cross-
examination in substance that the letter of instructions to the
defendant bank contained no limitation on the bank's authority
to pay the witness money.

J. In permitting witness McCoy to testify upon cross-
examination in substance that witness was authorized to draw
any money placed to his credit in defendant bank on his own
signature.

K. In rejecting portions of the evidence of M. P. McCoy,
given by deposition, which evidence was in substance that wit;

NATIONAL BANK OF COMMERCE. 203

ness McCoy had no authority from the Government to pay
money or draw checks against his account with defendant bank
except in payment of legitimate bills.

L. In rejecting and excluding plaintiff's Exhibit "E''.

M. In rejecting portions of the evidence of M. P. McCoy,
given by deposition, which evidence was in substance whether
or not witness McCoy had worked for the Government or per-
formed any services during the month of November, 1907.

N. In rejecting and excluding plaintiff's Exhibit "F".

O. In rejecting and excluding plaintiff's Exhibit "J".

III.

The Court erred in granting defendant's motion for a non-
suit of plaintiff's case at the conclusion of all of plaintiff's
evidence after plaintiff's case had been re-opened.

IV.

The Court erred in entering the final judgment of non-suit
against the plaintiff and dismissal of said action.

WHEEEFORE, The plaintifT prays that the judgment of
the District Court be reversed.

W. G. MCLAREN,
United States Attorney.

Indorsed: Assignment of Errors. Filed in the U. S. Dis-
trict Court, Western Dist. of Washington, Aug. 29, 1912. A.
W. Engle, Clerk. By F. A. Simpkins, Deputy.

204

UNITED STATES OF AMERICA VS.

United States District Court, Western District of Wasliington.
NortJiern Division.

UNITED STATES OF AMERICA,

Plaintiff,

vs.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant.

y No. 1933— C.

PETITION FOR WRIT OF ERROR.

The plaintiff above named, the United States of America,
feeling itself aggrieved by the judgment of the Court, made
and entered in this cause on the 27th day of June, 1912, herein,
comes now by W. G. McLaren, United States Attorney for the
Western District of Washington, and petitions this Court for
an order allowing it to prosecute a Writ of Error to the Circuit
Court of Appeals for the Ninth Circuit under and according to
the laws of the United States in that behalf made and provided.

w. G. McLaren,

United States Attorney for the Western

District of Washington.

Indorsed: Petition for Writ of Error. Filed in the U. S,
District Court, Western Dist. of Washington. Aug. 29, 1912.
A. W. Engle, Clerk. By F. A. Simpkins, Deputy.

NATIONAL BANK OF COMMERCE. 205

United States District Court, Western District of Washington.
'Northern D ivision.

UNITED STATES OF AMEEICA,

Plaintiff,
vs.

y No. 1933— C.

NATIONAL BANK OF COMMEECE,
a Corporation.

Defendant.

OEDEE ALLOWING WEIT OF EEEOE

Upon the motion of W. G. McLaren, United States Attorney
for the Western District of Washington, and upon the filing
of petition for Writ of Error and an assignment of errors;

IT IS OEDEEED, That a Writ of Error be and the same
is hereby allowed to have reviewed in the United States Cir-
cuit Court of Appeals for tlie Ninth Circuit the judgment
heretofore entered herein.

WITNESS THE SIGNATUEE OF THE HONOEABLE
EDWAED E. CUSHMAN, Judge of the above entitled Court,
at Seattle, Washington, this 29th day of August, 1912.

EDWAED E. CUSHMAN, Judge.

Indorsed: Order Allov.iug Writ of Error. Filed in the
U. S. District Court, Western Dist. of Washington. Aug. 29,
1912. A. W. Engle, Clerk. By F. A. Simpkins, Deputy.

206 UNITED STATES OF AMERICA VS.

United States District Courts ^^ estern District of Washington.
Northern Division.

UNITED STATES OF AMERICA, ^

Plaintiff,

vs.

No. 1933— C.

NATIONAL BANK OF COMMERCE,
a Corporation,

Defendant.

PRAECIPE FOR RECORD.

To the Clerk of the Above Entitled Court:

You will please prepare at once transcript of the record in
the above entitled cause on writ of error to the United States
Circuit Court of Appeals for the Ninth Circuit, and forward
the same to the Clerk of that Court, including in the transcript
the following papers necessarj- to the determination of the
question to be passed on by said Circuit Court of Appeals :

1. Complaint tiled December 22, 1910.

2. Answer filed February 11, 1911.

3. Plaintiff's demurrer to answer filed February 23, 1911.

4. Oral decision on demurrer to affirmative defense, filed
September 21, 1911.

5. Order sustaining demurrer to first affirmative defense
and overruling as to second, filed September 21, 1911.

6. Amended Answer, filed March 12, 1912.

7. Reply to amended answer, filed March 13, 1912.

8. Journal Entry March 13, 1912 (Journal 2, page 319-
320) granting motion for non-suit.

9. Petition for new trial, filed March 22, 1912.

10. Order denying motion for new trial, filed June 27,
1912.

11. Judgment of non-suit, filed June 27, 1912.

NATIONAL BANK OF COMMERCE. 207

12. Stipulation extending time for settlement of Bill of
Exceptions, filed June 27, 1912.

13. Order extending time for settlement of Bill of Excep-
tions, filed June 27, 1912.

14. Stipulation extending time for settlement of Bill of
Exceptions, filed July 17, 1912.

15. Order extending time for settlement of Bill of Excep-
tions, filed July 17, 1912.

16. Order extending time for settlement of Bill of Excep-
tions, filed August 24, 1912.

17. Stipulation authorizing filing of plaintiff's Exhibit
"G", filed July 30, 1912.

18. Order authorizing Clerk to file plaintiff's Exhibit ^'G",
filed July 30, 1912.

19. Motion to transmit exhibits with Bill of Exceptions,
filed August 22, 1912.

20. Stipulation for transmission of original exhibits, filed
August 22, 1912.

21. Order for transmission of original exhibits on writ of
error, filed August 22, 1912.

22. Bill of Exceptions, filed August 29, 1912.

23. Certificate certifying Exhibits "A", "B", "C\ "D",
"E", ''F" and "G", filed August 29, 1912.

24. Send plaintiff's Exhibits "A", "B", "C", "D", "E",
"F" and "G" attached to certificate relating to them, filed
August 29, 1912.

25. Assignment of Errors, filed August 29, 1912.

26. Petition for Writ of Error, filed August 29, 1912.

27. Order allowing Writ of Error, filed August 29, 1912.

28. Writ of Error, filed August 29, 1912.

29. Citation with Marshal's return, filed August 29, 1912.

30. Send original Writ of Error as well as include copy in
transcript.

31. Send original Citation, as well as include copy in
transcript.

32. This praecipe.

208 UNITED STATES OF AMERICA VS.

33. All indorsements of any kind whatsoever appearing
on any of the above named papers.

B. W. COINER,
United States Attorney.

C. F. RIDDELL,
Assistant United States Attorney.

Indorsed: Praecipe for Record. Filed in the U. S. Dis-
trict Court, Western Dist. of Washington, September 13, 1912.
Frank L. Crosby, Clerk. By F. A. Simpkius, Deputy.

In the District Court of the United States for the Western
District of Washington. Northern Division.

UNITED STATES OF AMERICA,

Plaintiff)

vs.

y No. 1933.
NATIONAL BANK OF COMMERCE,

a Corporation,

Defendant. ^

CLERK'S CERTIFICATE TO TRANSCRIPT OF RECORD.

United States of America,

Western District of Washinglon — ss.

I, Frank L. Crosby, Clerk of the District Court of the
United States, for the Western District of Washington, do
hereby certify the foregoing 212 printed pages, numbered from
1 to 212, inclusive, to be a full, true and correct copy of the
record and proceedings in the above and foregoing entitled
cause, as is called for by the praecipe of the attorney for the
plaintiff, save and excepting Government's Exhibits "A", "B",
"C, "D", "E", "F" and "G", separately certified and trans-
mitted to the Circuit Court of Appeals, there to be inspected
and considered, together with the record upon appeal in this
cause, said exhibits being transmitted pursuant to the Order
of the District Court made in the said cause August 29, 1912,

NATIONAL BANK OF COMMERCE. 209

a copy of which order will be found on page 199 of said record,
and that the same constitutes the record on appeal from the
Order, Judgment and Decree of the District Court of the
United States, for the Western District of Washington, to the
United States Circuit Court of Appeals for the Ninth Judicial
Circuit in said cause.

I further certif}^ that I hereunto attach and herewith trans-
mit the original Citation and Writ of Error in this cause.

I further certify that the cost of preparing and certifying
the foregoing transcript of the record on appeal is the sum
of $244.20, chargeable to the United States, and that the said
sum will be included in my account against the United States
for Clerk's fees for the quarter ending December 31, 1912.

IN TESTIMONY W^HEKEOF, I have hereunto set my
hand and affixed the seal of said District Court, at Seattle, in
said District, this 10th day of October, 1912.

(Seal) FRANK L. CROSBY, Clerk.

United States Circuit Court of Appeals for the ^inth Circuit

Court.

UNITED STATES OF AMERICA,

Plaintiff in Error,

vs.

V No. 1933.
NATIONAL BANK OF COMMERCE,

a Corporation,

Defendant in Error.

CITATION.

United States of America,
Ninth Judicial Circuit — ss.

To the National Bank of Commerce, a corporation, and
Messrs. Kerr & McCord, its attorneys, GREETING :

210 UNITED STATES OF AMERICA VS.

You are hereby cited and admonished to be and appear at
a session of the United States Circuit Court of Appeals for the
Ninth Circuit, to be holden at the city of San Francisco, in
said circuit, on the 27th day of September, 1912, pursuant to
a writ of error filed in the Clerk's office of the District Court
of the United States for the Western District of Washington,
wherein the United States of America is plaintiff in error and
the National Bank of Commerce, a corporation, is defendant in
error, to show cause, if any there be, why the judgment rendered
against the said plaintiff in error, as in the said writ of error
mentioned, should not be corrected, and why speedy justice
should not be done to the parties in that behalf.

WITNESS THE HONORABLE EDWARD DOUGLAS
WHITE, Chief Justice of the United States, this 29th day of
August, 1912, and in the one hundred and thirty-seventh year
of the Independence of the United States of America.

(Seal) EDVv^ARD E. CUSHMAN,

United States District Judge.

RETURN ON SERVICE OF WRIT.

United States of America,

Western District of Washington — ss.

I hereby certify and return that I served the annexed CI-
TATION on the therein named National Bank of Commerce,
a corporation, by handing to and leaving a true and correct
copy thereof with E. S. McCord, a member of the within named
firm of Kerr & McCord, its attorneys, personally, at Seattle, in
said District on the 30th day of August, A. D. 1912.

JOSEPH R. H. JACOBY, U. S. Marshal.
By H. Y. R. ANDERSON, Deputy.

August 30, 1912.

Fees 12.12.

Indorsed: No. 1933. United States Circuit Court of Ap-
peals for the Ninth Circuit. United States of America, Plain-

NATIONAL BANK OF COMMERCE.

211

tiff in Error, vs. National Bank of Commerce, a corporation,
Defendant in Error. Citation. Filed in the U. S. District
Court, Western Dist. of Washington, Aug. 29, 1912. A. W.
Engle, Clerk. Bv F. A. Simpkins, Deputy.

United States District Court, M'estern District of Washington.
North em D i vision .

UNITED STATES OF AMERICA,

Plaintiff,

vs.

1^ No. 1933.
NATIONAL BANK OF COMMERCE,

a Corporation,

Defendant.

WRIT OF ERROR.

United States of America,
Ninth Judicial Circuit — ss. .

THE PRESIDENT OF THE UNITED STATES :

To the Honorable Judge of the District Court of the United
States for the Western District of Washington, GREETING :

Because of the record and proceedings, as also in the rendi-
tion of the judgment, of a plea which is in the said District
Court, before you, or some of you, between the United States
of America, plaintiff, and the National Bank of Commerce, a
corporation, defendant, a manifest error hath happened, to the
great damage of the said United States of America, plaintiff,
as by its complaint appears, we being willing that error, if any
hath been, should be duly corrected, and full and speedy justice
done to the parties aforesaid on this behalf, do command you,
if judgment be herein given, that then under your seal, dis-
tinctly and openly, you send the record and proceedings afore-
said, with all things concerning the same, to the United States

212 UNITED STATES OF AMERICA VS.

Circuit Court of Appeals for tlie Ninth Circuit, together with
this writ, so that you have the same at San Francisco, Cali-
fornia, in said Circuit, on the 2Tth day of September, 1912,
next, in the said Circuit Court of Appeals, to be then and there
held, that the record and proceedings aforesaid being inspected,
the said Circuit Court of Appeals may cause further to be done
thereon to correct that error, what of right, and according to
the laws and customs of the United States, should be done.

Witness the Honorable Edward Douglas AYhite, Chief Jus-
tice of the United States, this 29th day of August, 1912, and in
the one hundred and thirty-seventh year of the Independence of
the United States.

Allowed by:
(Seal) EDWARD E. CUSHMAN,

United States District Judge.

Attest :

A. W. ENGLE,

Clerk of the United States District Court,

Western District of Washington.
By F. A. SIMPKINS, Deputy.

Service of the within Writ of Error, and receipt of a copy
thereof, is hereby admitted this 30th day of August, 1912.

KERR & McCORD,
Attorneys for Defendant — National Bank of Commerce,

a Corporation.

Indorsed: No. 1933— C. In the District Court of the
United States for the Western District of Washington. United
States of America, Plaintiff, vs. National Bank of Commerce,
a corporation. Defendant. Writ of Error. Filed in the U. S.
District Court, Western Dist. of Washington, Aug. 29, 1912.
A. AV. Engle, Clerk. By F. A. Simpkins, Deputy.

IN THE

United States Circuit Court
of Appeals

FOR THE

NINTH CIRCUIT

No. 2190

UNITED STATES OF AMERICA,

Plaintiff in Error,
vs.

NATIONAL BANK OF COMMERCE
OF SEATTLE, a corporation,

Defendant in Error.

Upon Writ of Error to the United States District

Court for the Western District of Washington

Northern Division.

Brief of Plaintiff In Error

STATEMENT OF THE CASE.

During the years 1907, 1908 and 1909 one M. P.
McCoy was an examiner of surveys and special
disbursing agent of the United States with head-

quarters at Seattle. McCoy's official duties required
him to go into the field in various parts of the
states of Washington, Oregon, Idaho and Montana
and run over again one-tenth of the lines run
by surve3^ors who made surveys of public land under
contract with the government, in order to check
up their work. (Record p. 58,) To pay for the
expenses w^hich he incurred, there were deposited
with the defendant corporation, a national deposi-
tary, various sums to the credit of M. P. McCoy
as such special disbursing agent, which McCoy was
to use solely for the purpose of making payment
of the expenses incurred by him officially as afore-
said. He had his check book and drew various
checks, signing them "M. P. McCoy, Examiner of
Surveys and Sp. D. A." When he made a pay-
ment he was required to take the signature of the
person he paid on a voucher and give him a check
on said accoimt in the defendant bank for that
amount. (Record pp. 45-46.) McCoy sent in to the
government each week a report covering his work
for that week and every quarter submitted an
expense account to which was attached the different
vouchers covering the payments made by check on
this government account (Record pp. 45-48) . Every

three months the bank sent to Washington the
cancelled checks covering the same time for which
McCoy rendered his quarterly account (Record
pp. 53, 70-71).

During part of the time in question the men
he employed signed a monthly pay-roll when they
received their checks for wages and the other pay-
ments for government expenses were evidenced by
vouchers, in the manner before stated. This pay-
roll was forwarded to the department like a voucher
(Record pp. 46, 51-53).

McCoy went wrong and instead of doing the
work on the surveys from 1907 to 1909 he falsified
his reports to the government and executed fraud-
ulent checks purporting to pay for work which
was never performed (Record pp. 60-63). He
forged vouchers for the amounts of the checks in
the names of fictitious persons, issued the checks
in the same names, forged the names of the fictitious
payees to the endorsement of the checks, deposited
the checks to the personal credit of the fictitious
payee in some other bank (Record pp. 66, 67)
which forwarded the same to the defendant bank.
The defendant paid them. McCoy later checked

the money out of the account in the fictitious name,
deposited the money in his personal account and
used it( Eecord p. 47).

One W. G, Good, as special agent of the gov-
ernment, was finally sent out to investigate McCoy's
work about September, 1909, and found that the
services McCoy claimed to have rendered had never
been performed; that the vouchers covering these
checks in question were false and the person's name
therein, fictitious (Record p. 97-100). At the time
Good made his investigation, the fraudulent checks
for the months of July and August, 1909, were
still in the defendant bank and had not jet been
sent to Washington (Record pp. 98-99). McCoy
confessed, was indicted and plead guilty. Good,
din'ing the investigation, obtained from the bank
the checks for tiie two months of July and August,
1909, notified the bank that they were all fraudu-
lent, as he says, ^'gave them the historj^ of the whole-
case," and returned the checks to the possession of
the bank (Record pp. 118, 119).

On March 4, 1910, the United States Attorney
for the Western District of Washington made a
demand for the re-payment of the $15,129.81 herein
sued upon, attached to his demand a list of the

checks with their description and notified the
defendant that its officers and attorneys would be
allowed to inspect the checks (Record pp. 137, 147).
The bank later sent an officer to inspect the checks
and he did so (Record pp. 121, 122). The bank
refused to repay the money and this action was
instituted.

The defendant's answer set up two affirmative
defenses, the second of which was to the effect that
the deposit in this case was made in the usual and
ordinary manner and it was not the duty of the
defendant to inquire as to the name of the payee
of McCoy's checks; that the checks bore his genuine
signature and that the bank rendered monthly
statements showing the amount of each check, both
to the government and to McCoy, in conformity with
the usual custom of bankers; that no complaint of
the payment of such checks reached the bank until
March 5, 1910; that it was the duty of the plaintiff
to examine the account and to promptly notifj^ the
defendant of the alleged forgeries; that by reason
of the failure to notify the defendant within a
reasonable time, plaintiff was barred and estopped
from starting this action (Record 14, 15). A
demurrer to this affirmative defense was overruled

(Record p. 19) and defendant later in an amended
answer repeated the same defense in an amplified
form, adding that by reason of the failure to notify
the bank of McCoy's fraud within a reasonable time
the defendant had lost its right against the various
banks through which the checks had been forwarded
for payment and that therefore the government was
estopped from bringing this action (Record 22,23).
The Court at the close of the plaintiff's testimony
granted a nonsuit, upon the theory that a tender
to the bank of the fraudulent checks was a condi-
tion precedent to any cause of action (Record pp.
116-117, 122, 28).

SPECIFICATION OF ERROR.

The Court erred in overruling plaintiff's demur-
rer to the defendant's second affirmative defense
(Record pp. 13-19, 22-23).

11.

The Court erred in rejecting portions of the
evidence of M. P. McCoy, given by deposition, in
substance that his instructions were to pay the
necessary expenses to carr^^ out the examination of
the different snrveys (Record pp. 44, 151).

III.

The Court erred in excluding and rejecting
plaintiff's Exhibit *'B," being the fraudulent
vouchers corresponding to certain checks herein
sued upon (Record pp. 49-52, 155-156, 90-92).

IV.

The Court erred in rejecting portions of the
evidence of M. P. McCoy, given by deposition, which
evidence was in substance that the vouchers sent
in by said McCoy to the Department were regular
and in the usual form and manner (Record pp.
51-52, 156-157).

The Court erred in excluding and rejecting
plaintiff's Exhibit ''C," being certain quarterly
accounts current covering the transactions evidenced
by the checks here in suit (Record pp. 52-53, 157-

158).

VI.

The Court erred in rejecting and excluding
portions of the evidence of M. P. McCoy, given by
deposition, which evidence was in substance whether
or not there was anything on the face of the quar-

terly accounts or upon the individual vouchers or
pay-rolls indicating any irregularity or fraudulent
practice (Record pp. 54, 159).

VII.

The Court erred in rejecting and excluding
plaintiff's Exhibit "D," being a quarterly account
(Record pp. 55, 159).

VIII.

The Court erred in permitting the witness, M. P.
McCoy, to testify upon cross-examination regarding
how much money he had expended legitimately for
the Government between the years 1900 and 1909
(Record pp. 57, 58).

IX.

The Court erred in permitting witness McCoy
to testify upon cross-examination in substance that
his letter of instructions from the Department
adivised the bank that he had authorit}^ to draw
any money placed to his credit with the defendant
bank as Special Disbursing Agent (Record pp 69,
70).

The Court erred in permitting witness McCo}^

to testif}^ upon cross-examination in substance that
the letter of instructions to the defendant bank
contained no limitation on the bank's authority to
pay the witness money (Record pp. 81, 82).

XI. "

The Court erred in rejecting portions of the
evidence of witness M. P. McCoy on re-direct exam-
ination, in substance that the witness had no author-
ity from the Government to pay money or draw
checks against the account in question with the
defendant bank except in payment of legitimate
bills (Record pp. 83, 186-187).

XII.

The Court erred in rejecting and excluding
plaintiff's Exhibit ''E" (Record pp. 84, 85).

XIII.

The Court erred in rejecting portions of the
evidence of said McCoy, given by deposition, which
evidence was in substance whether or not that wit-
ness had done any work for the Government or
perfomied any services during the month of
November, 1907 (Record pp. 85, 187).

XIV.

The Court erred in rejecting and excluding
plaintiff's Exhibit ''F" (Record p. 85).

XV.

The Court erred in rejecting and excluding
plaintiff' Exhibit ''J" (Record pp. 110-112, 124-137,
43-44).

XVI.

The Court erred in granting defendant's motion
for a nonsuit of plaintiff's case at the conclusion of
all of plaintiff's evidence after plaintiff's case had
been re-opened.

XVII.

The Court erred in entering the final judgment
of non-suit against the plaintiff and dismissal of
said action.

ARGUMENT.

The various questions presented by this record
resolve themselves easily into practically three dif-
ferent heads only.

A. The error in the granting of the non-suit
and dismissal of the action (assignments XVI. and
XVII.) will be practically conclusive of this case.

B. In the event of a reversal, assignment
numbered I, the error in overruling demurrer to
the affirmative defense will only be material on a
new trial.

C. All the other assignments of error numbered
II. to XV. inclusive, relate to the admission or rejec-
tion of e^ddence and are of minor importance.

THE MOTION FOR NON-SUIT SHOULD NOT
HAVE BEEN GRANTED.

The following is an outline of the government's
argument on this point:

The general theory upon which a recovery is
had where money has been paid under a mistake
of fact will be called to the attention of the court
and then there will be noted so far as applicable
to this case the various circumstances and principles
under which a recovery might be denied.

First: That a tender to the bank of the
cancelled checks was not necessary.

Second: The question of the possible influ-
ence of any negligence on the part of the
government will be discusssed in its vari-
ous phases.

Third: It will be sho^vii that the fact that
these checks were made out to fictitious
payees did not make them payable to
bearer and is no defense, and there will
be cited to the court, cases on all fours
with the case at bar in which recover}?- w^as
allowed, and one case in which a recovery
was denied.

The general theory on which a recover}^ is had
by a depositor from his bank when the latter has
paid the depositor's check upon a forged endorse-
ment, is that money paid or credited on a mutual
mistake can be recovered. The contract relation
betw^een a depositor and a bank is such that the
bank can be compelled to pay upon demand any
written order of the depositor for money, but not
otherwise, and that the bank may not charge against
its depositor any check which has been paid by it
w^here the bank obtains title to the paper over a
forgery.

United States vs. National Exchange Bank
of Providence, 214 U. S. 302, 53 L. Ed.
1006;

First National Bank vs. Whitman, 94 U. S.
(4 Otto) 343, 24 L. Ed. 229;

Shlpman vs. Bank, 126 N. Y. 318, 12 L. R. A.
791, 22 Am. State Reports, 821 ;

Harmon vs. Old Detroit National Bank

(Mich.) 116 N. W. 617, 17 L. E. A. N. S.
514;

Onondaga County Savings Bank vs. United
States, (Circuit Court of Appeals, Second
Circuit) 64 Fed. 703.

Unless therefore there is some fact or circum-
stance to take this case out of the general rule,
the court was in error in granting the non-suit.
For this reason the rest of the government's argu-
ment on this point resolves itself simply into a
negation of the various objections and exceptions
which might take the present case out of the general
rule.

The learned trial court granted the non-suit on
the theory that a tender of the cancelled checks to
the bank at the time of the demand on the bank for
the payment of the money here in suit, was a con-
dition precedent to recovery. The court was of
opinion that a tender of the checks to the prior
endorsing bank w^as a condition precedent to any
right of action by this defendant against the bank
w^hich was the prior endorser of this paper (Record
116-117) and that therefore, a tender of the checks
was necessarv in order to enable this defendant

bank to recover from the other banks. The court's
position however is absohitely untenable and the
premise on which he bases his argument has twice
been considered by the United States Supreme
Court.

Leather Manufacturers' National Bank vs.
Merchant's National Bank, 128 U. S. 26,
32 L. Ed. 342;

United States vs. National Excliange Bank,
214 U. S. 302, 53 L. Ed. 1006.

In the Leather Manufacturers' Bank Case, the
point was squarely before the court and it was
held that the payee bank might recover of the prior
endorser without any demand whatever and that the
statute of limitations began to run immediately upon
the payment, the court saying at page 35 (p. 344) :

"One who by presenting forged paper to a bank
procures the payment of the amount thereof to
him, even if he makes no express warranty, in law
represents that the paper is genuine, and, if the
payment is made in ignorance of the forgery, is
liable to an action by the bank to recover back the
money which, in equity and good conscience, has
never ceased to be its property. It is not a case
in which a consideration, which has once existed,
fails by subsequent election or other act of either
party, or of a third person; but there is never, at
any stage of the transaction, any consideration for
the payment. Espy vs. Bank of Cincinnati, 85 U. S.

18 Wall. 604 (21: 917); Giirnetj vs. Womersley,
4 El. & BI. 133; Cahot Bank vs. Morton, 4 Gray,
156; Aid rich vs Jackson, 5 R. I. 218; White vs. Con-
tinental Nat. Bank, 64 K Y. 316.

Wlienever money is ]3aid. upon the representation
of the receiver that he has either a certain title
in property transferred in consideration of the
payment, or a certain authority to receive the money
paid, when in fact he has no such title or authority,
then, although there be no fraud or intentional
misrepresentation on his part, yet there is no con-
sideration for the pa^Tiient; and the money remains
in equity and good conscience, the property of the
paj^er, and may be recovered back by him, without
any previous demand, as money had and received
to his use. His right of action accrues, and the
Statute of Limitations begins to run, immediately
upon the payment."

This language is quoted with approval in the
case of United States vs. National Exchange Bank,
214 U. S. 302, 316 ; 53 L. Ed. 1006, 1011.

In the prior case of Cooke vs. Ignited States,
91 U. S. (1 Otto) 389, 23 L. Ed. 237, the United
States sued J. Cooke and others for eighteen coun-
terfeit one thousand dollar bonds of the United
States for which the government had paid them
cash. It appears from the argument of counsel
for J. Cooke & Co., 23 L. Ed. 240 that:

''These notes in question were surrendered to
the officer selected bi^ the United States to receive

and pay for tliem, and on such surrender were
niutilatel by the cancellation or punching out of the
signature on the face of the notes, and otherwise
defaced. And the Government not only has not
returned the notes, but by its own acts has rendered
itself unable to return and restore these obligations
to us.

It has deprived us of the right of making
reclamation upon the parties upon whom the notes,
if they pass through our hands, were received.

The rule is, that the party to whom forged or
counterfeit obligations are passed, must notify the
party from whom they were received, immediatelj^^
and must tender to him the instruments themselves.

In this case no notification was given to the
defendants until three weeks after the notes were
received, and the notes themselves had been defaced
and mutilated."

The objection also appears in 91 IT. S. 395.
This is the precise point which counsel raises in
case at bar and was passed upon by the United
States Supreme Court in the Cooke case in the
following language :

"There have been other errors assigned upon
the rulings made in the progress of the trial as
to the admission of evidence. These need not be
specially alluded to. It is sufficient to say that w^e
think there is no error here. The same ma}^ be said
as to the ruling of the court upon the punching or
cancellation of the notes. If they were counterfeit,
the cancellation could do no harm; for they were

worthless before. If they were genuine, they had
already been cancelled by the payment."

The court in the Leather Manufacturers' Bank
Case recognized a distinction between a suit by a
depositor against his bank and a suit by that bank
against a prior endorser and stated that a demand
was necessary in the former case, but that not even
that formality was required in the latter.

The question as to whether or not the demand
must be accompanied by a tender of the checks
themselves has been squarely passed upon in the
case of United States vs. Onondaga County Savings
Bank, 39 Fed. 259, which was affirmed by the Circuit
Court of Appeals, Second Circuit, in Onondaga
County Savings Bank vs. United States, 64 Fed.
703, where the court say at page 705:

''The refusal of the defendant in error to return
the drafts has in no way prejudiced the plaintiff
in error, or deprived it of any remedy against those
who defrauded it."

The ground on which the court allowed the non-
suit was therefore untenable.

11.

As to negligence : it appears from the testimony

in this case that McCoy deposited these checks in
other banks where he gave a false name and that
defendant bank paid them, relying on the endorse-
ments of the other banks. It does not appear that
this defendant made any investigation whatever to
determine the authenticity of the endorsements. It
also appears that an examination of the cancelled
checks and the bank's statement would not have
revealed the irregularities of McCoy.

The bank itself having been negligent in failing
to make any investigation to determine the authen-
ticity of the endorsements, cannot urge negligence
of the Government as a defense.

Leatlier Manufacturers' Bank vs. Morgan,
117 IT. S. 96, 112, 29 L. Ed. 811 ;

Neiv York Produce, ExcJiamge Bank vs.
Houston, 169 Fed. 787-788 ;

First National Bank vs. Fourth National
Bank, 56 Fed. 967, 971.

In the latter two cases the language of Mr.
Justice Harlan in Leather Manufacturers' Bank
vs. Morgan was cited to this ver}^ point:

"Of course, if the defendant's officers, before
paying the altered checks, could by proper care and
skill have detected the forgeries, then it cannot

receive a credit for the amount of those checks,
even if the depositor omitted all examination of his
account. ' '

Moreover, the negligence of the bank through
which this paper was received is imputable to the
defendant bank. In Harmon vs. Old Detroit
National Bank, (Mich.) 116 N. W. 617, 17 L. R.
A., N. S. 514, 519-520, the court say:

"In this case the defendant took no precautions
before paying the warrant to ascertain the identity
of the payee. It did not show that it paid the
warrant to the payee named therein. It evidently
relied upon the identification made by the bank in
Denver, Colorado, where the warrant was cashed,
and whether that bank took the requisite precau-
tion we do not know. It would naturally excite
suspicion that a check drawn in Detroit, payable to
a corporation in Chicago, on a bank in Detroit,
should be presented to a bank in the distant city
of Denver. It was clearly the duty of the Denver
bank to take proper means to assure itself that it
was paid to the proper party; in other words, to
take proper means to identify the payee. 2 Morse,
Banks & Banking, Sec. 446b ; Ellis vs. Ohio Life Ins.
d' T. Co., 4 Ohio St. 628, 64 Am. Dec. 610. The
court in that case said:

'Where the negligence reaches beyond the
holder and necessarily affects the drawee, and con-
sists of an omission to exercise some precaution,
either b}" the agreement of the parties or the course
of business devolved upon the holder, in relation to
the genuineness of the paper, he cannot, in negligent

disregard of this duty, retain the money received
upon a forged instrument.'

The negligence of the Denver bank is imputable
to the defendant."

Were that not sufficient for the purposes of
this ease, the Government could urge on the court
the principle that an examination by the depositor
of his pass book and checks is all the law requires,
and that where such examination, as in this case,
would have disclosed no irregularities to the govern-
ment, the record need not show whether such exam-
ination was or was not made.

Leather Manufacturers' Bank vs. Morgan^ 117

U. S. 96, 117, 29 L. Ed. 811, 819, where the court

say:

"From Welsh vs. German- American Bank, it
is clear that the comparison by the depositor of his
check book with his pass book would not necessarily
have disclosed the fraud of his clerk; for the check
when paid by the bank was, in respect of date,
amount, and name of payee, as the depositor
intended it to be, and the fraud was in the subse-
quent forgery by the clerk of the payee's name.
As the depositor was not presumed to know, and
as it did not appear that he in fact knew, the
signature of the payee, it could not be said that he
was guilt}^ of negligence in not discovering, upon
receiving his pass book, the fact that his clerk or
some one else had forged the payee's name in the
indorsement. ' '

Counsel attempted to put into this record facts
indicating that the Government b}" some independ-
ent investigation could have determined whether
or not McCoy was conducting his business for the
Government in a regular manner, but such facts,
even if established, cannot avail the defendant, for
the depositor owes the bank no duty even to search
for or discover forged endorsements on his bills
or checks {National City Bank vs. Third National
Bank, 111 Fed. 136, 140) nor to conduct an inde-
pendent investigation in order to prevent the fraud
of a dishonest agent {National Bank of Commerce
vs. Tacoma Mill Company, 182 Fed. 1, 12-13).

The Government was not negligent in failing
to discover these forgeries for the additional reason
that the Government is not presumed, any more
than any other depositor, to know the signatures
of the payees of its checks.

United States vs. National Exchange Bank,
214 U. S. 302, 317, 53 L. Ed. 1006, 1012..

Leather Manufacturers' Bank vs. Morgan,
117 U. S. 96, 117; 29 L. Ed. 811, 819.

It apjDears also that the witness. Good, when
conducting his investigation, gave immediate notice
to the defendant bank of the forgery of the checks.

The court will notice tliat Good's investigation
occurred about September, 1909; that he got the
cancelled checks for two months from the defendant
bank and after McCoy had plead guilty, he notified
the defendant bank that the checks were fraudu-
lent, ''gave them the history of the whole case,"
and returned to the bank the checks they had given
him, which the bank thereupon forwarded to the
Government and claimed credit for them in their
accounts. It appears therefore that notice was
given by the Government through its agent when
it first had knowledge of the transaction and that
irrespective of any question of negligence as a
defense in this case, the facts show that the Gov-
ernment, through its officers has in every respect
exercised reasonable prudence. We know of no
other possible phase of the question of negligence
which could be urged as a defense to this case.

III.

These checks being made payable to fictitious
payees were not, therefore, payable to bearer.

In a number of cases where the same question
presented by this record, or a similar question,
was under discussion, some stress was laid on the

argument that where an agent without the knowl-
edge of the principal, procures the checks to be
made to a fictitious payee, they are therefore payable
to bearer, and that being payable to bearer, the bank
has paid them according to their tenor and the
signature of the payee is not a forgery. The Gov-
ernment believes this contention to be unsound and
there is certainly a strong line of authorities against
it.

The argument of plaintiff on this point is briefly
as follows:

The Government admits that a check is payable
to a fictitious payee whether the payee is an actual
person or not if the maker of the paper intends
that it shall never be paid to the payee named. It
is, however, the intention of the maker which
governs. The United States was the maker of these
checks under the well recognized exception to the
general rule that where a Government agent signs
a contract with his o^m name, but in his official
capacity on behalf of the Government and pursuant
to the authority of the United States, he does not
become a party to the contract, but the contract is
that of the Government, and finally that his knowl-

edge and intention as an agent, cannot in this case
be imputed to the Government for the reason that
McCoy obtained his knowledge that these payees
were fictitious while he was engaged in a scheme to
defraud the Government. Upon this argument the
Government concludes that the checks were not
payable to a fictitious payee within the knowledge
of the maker and therefore were not payable to
bearer and McCoy's endorsement of them was
forgery.

An additional argument on this phase of the
case is found in the fact that the regulations of
the Treasury Department, which have the force
of law and of which the court takes judicial notice,
prohibit the execution of commercial paper by
a disbursing agent in the name of a fictitious
payee. The authority of every agent of the
Government is a delegated authority and parties
dealing with agents of the Government must at
their peril determine the extent of the agent's
authority. The rejected exhibits in this case, being
the vouchers for payments, show the method
adopted by the Government for the disbursements
of this public money and would have sho^^m the
bank, had it inquired into the authority of the

agent, that it was the purpose and intention of tlie
Government tliat no check should be made payable
to a fictitious payee or to bearer, but that the signa-
ture of the payee must correspond with the signa-
ture on the voucher taken by the disbursing agent.

The Washington statute, being Section 3,400
of Bem. & Bal. Code (Laws 1899, page 342, Section
9) provides that an instrument is payable to bearer
''when it is payable to the order of a fictitious or
non-existing person and such fact was known to the
person making it so payable."

That the payees on these checks were both ficti-
tious and non-existing persons we think admits
of no question. The Government contends, however,
that it is the intention of the maker of the paper
which governs and determines whether or not the
instrument thereby becomes payable to bearer. The
authorities indeed, are practically uniform to the
effect that where the maker intends the paper to be
paid to a real person, or does not know that the
payee is a fictitious or non-existing person, the
instrument does not thereby become payable to
bearer.

The statute above quoted is declaratory of the

common law on this snbject and tlie following
decisions are therefore in point.

Harmon vs. Old Detroit National Banh,
(Mich.) 116 N. W. 617, 17 L. R. A., N. S.
514, 519 and cases cited;

Armstrong vs. National Bank, 46 Ohio State
512, 6 L. E. A. 625, 15 Am. State Reports
655, 22 N. E. 866;

Shipman vs. Bank, 126 N. Y. 318, 12 L. R. A.
791, 22 Am. State Rep. 821, 27 N. E. 371;

Chism vs. First National Bank, 96 Tenn.
649, 32 L. R. A. 778, 54 Am. St. Rep. 863,
36 S. W. 387.

Even in the case of Snyder vs. Corn Exchange

National Bank, (Penn.) 70 Atlantic, 876, which

is an authority against the government's recovery

in this case, it is said at pages 878 and 879:

''The intent of the drawer of the check in insert-
ing the name of a payee is the sole test of whether
the payee is a fictitious person."

Although these checks were signed b}'' McCoy
"M. P. McCoy, Examiner of Surveys and Sp. D.
A." the Government was the maker of these checks,
under the familiar exception to the general rule
of agency that where a ]3ublic agent acts in the
line of his duty and by legal authority, his contracts
made on account of the Government are public and

not personal, even where they are signed by the
agent personally.

Jones vs. LeTomU, 3 Dallas 383, 1 L. Ed.
647;

Armour vs. Roberts^ 151 Fed. 846, 852;

Hodgson vs. Dexter, 1 Cranch 345, 2 L. Ed.
130;

Garland vs. Davis, 4 How. 131, 148; 11 L. Ed.
907;

29 Cyc. 1446-7.

In Jones vs. Le Tomhe, supra, the consul general
of the French Republic drew a bill of exchange and
signed it "LeTombe, the Consul General." The
defendant was held not personally liable on this
contract on the ground that it had been made by
him on account of the Government and that credit
had been given to the Government as an official
engagement.

In Hodgson vs. Dexter, supra, the defendant,
then late Secretary of War, was sued for breach of
a covenant in a certain lease in that the buildings
on the premises had been destroyed by fire. In the
body of the lease the covenantor was described as
"Samuel Dexter, of the same place. Secretary of
War," the covenant purported to run from ''the

^^8 " '

said Samuel Dexter, for himself, his heirs, executors,
administrators and assigns," and the indenture was
signed ''Samuel Dexter, Seal." Of this indenture
the Chief Justice says at pages 363-365 (L. Ed.
136-137) :

''It appears, from the pleadings, that congress
had passed a law authorizing and requiring the
President to cause the public offices to be moA^ed
from Philadelphia to Washington; in pursuance of
which law, instructions, by the President, were
given, and the offices belonging to the department
of war were removed; that it became necessary to
provide a war office, and that for this purpose and
no other, the agreement was entered into by the
defendant, who was then at the head of this depart-
ment. During the lease, the building was consumed
by fire.

It is too clear to be controverted, that where a
public agent acts in the line of his duty and by legal
authority, his contracts made on account of the
government, are public and not personal.

They enure to the benefit of, and are obligatory
on, the government; not the officer.

A contrary doctrine would be productive of the
most injurious consequences to the public, as well
as to individuals. The government is incapable of
acting otherwise than by its agents, and no prudent
man would consent to become a public agent, if he
should be made personally responsible for contracts
on the public account. This subject was very fully
discussed in the case of Macheafh vs. Hal dim and,
cited from 1 Term Reports ; and this court considers

the principles laid down in that case as consonant
to policy, justice and law.

The plaintiff has not controverted the general
principle, but has insisted, that, in this case, the
defendant has, by the terms of his contract, bound
himself personalh^

It is admitted that the house was taken on
account of the public, in pursuance of the proper
authority; and that the contract was made b}^ the
person at the head of the department, for the use of
which it was taken ; nor is there any allegation, nor
is there any reason to believe, that the plaintiff
preferred the private responsibility of the defendant
to that of the government ; or that he was unwilling
to contract on the faith of government. Under
these circumstances, the intent of the officer to
bind himself personally must be very apparent
indeed, to induce such a construction of the con-
tract.

The court can perceive no such intent. On the
contrary, the contract exhibits every appearance
of being made with a view entirely to the govern-
ment.

The official character of the defendant is stated
in the description of the parties. This, it has been
said, might be occasionecl by a willingness in the
defendant to describe himself by the high and
honorable office he then filled. This unquestionably,
is possible, but is not the fair construction to be
placed on this part of the contract, because it is not
usual for gentlemen, in their private concerns, to
exhibit themselves in their official character.

The court is unanimously and clearly of opinion,

that this contract was entered into entirely on behalf
of government, by a person properly authorized
to make it, and that its obligation is on the govern-
ment only.

Whatever the claims of the plaintiff may be,
it is to the government, and not to the defendant,
he must resort to have them satisfied.

Judgment affirmed with costs."

In Garland vs. Davis, supra, the fomier Clerk

of the House of Eepresentatives had placed with

plaintiff a verbal order for the publication of a

volume of the United States Laws. The Clerk died,

his successor in office violated the contract and gave

it to another person. The plaintiff sued in tort.

The plea was no7i assumpsit. In remanding the

case upon the technicality of pleading the court in

referring to the merits say at pages 148-149 (L. Ed.

915) :

''But that being a promise confessedly on the
whole evidence made by the original defendant, or
his predecessor, as a public agent, if now I'endering
final judgment, we should probably, in that view
of the record (no toii; having been put in issue
or found by the verdict), be obliged to decide against
the original plaintiff on the merits, because public
agents are not usually liable on mere contracts or
promises made in behalf of their principals."

The following cases are cited to the same effect
but have not been examined by the Government:

Macheath vs. Haldimand, 1 Term Rep. 172;

Untcin vs. WolseJey, 1 Term Rep. 674;

Myrtle vs. Beaver^ 1 East, 135 ;

Rice vs. Shute, 1 East, 579;

Brotcn vs. Austin, 1 Mass. Rep. 208;

Freeman vs. Otis, 9 Mass. Rep. 272;

Sheffield vs. Watson, 3 Caines, 69;

Fox vs. Drake et al., 8 Cowen, 191; 2 DalL,
444;

Osborne vs. Kerr, 12 Wend., 179;

Story on Agency, sees. 302-308;

Lord P aimer ston's Case, 3 Brod. & Bing.
275.

The Govermnent therefore is the maker of these
checks and it is its intention which governs or the
intention of its agent acting within the scope of
his authority, but in this case McCoy was acting
in fraud of the Government in violation of his
authority and his knowledge that the payees were
fictitious and his intention to defraud his principal
cannot be imputed to it.

This court has squarely passed on that proposi-
tion in National Bank of Commerce vs. Tacoyna Mill
Co. (1910) 182 Fed. 1, 11:

"But, having used such reasonable and proper

precautions, he cannot be held liable for the deceit-
ful and dishonest acts of his agent, for the simple
and very potent reason tliat the agent is not his
agent for such purposes. As to them, the agent is
acting wholly without the scope of his authority.
To many details of an extensive business, it is
impossible for the owner or manager to give per-
sonal attention." (Italics ours.)

Other authorities to the same effect are numerous.

Central Coal dt Coke Co. vs. Good, 120 Fed.
793, 798 and cases cited;

Mulroney vs. Royal Insurance Co., 163 Fed.
833, 835-6, and cases cited;

Lilly vs. Hamilton Bank, 178 Fed. 53, 56-58;

Awerican Surety Co. vs. Paidy, 170 U. S. 133,
156-159, 42 L. Ed. 977, 986-987.

In the Lilly case the court say:

"It is a general rule of the law of agency that
a principal is bound by the knowledge of his agent.
In the case of The Distilled Spirits, 11 Wall. 367
(20 L. Ed. 167), Mr. Justice Bradlev said that the
rule 'is based on the principle of law that it is the
agent's duty to communicate to his principal the
knowledge which he has respecting the subject-mat-
ter of negotiation, and the presumption that he will
perform that duty.' That the rule has certain ex-
ceptions was conceded by Justice Bradlev. He said,
for example, that when it would be unlawful for an
agent to communicate his knowledge to his prin-
cipal, as when it has been acquired confidentiallv
as attorney for a former client in a prior transac-

tioii, the reason of the rule ceases, and his principal
ought not to be bound hy the agent's secret and con-
fidential information. That case did not call for anj
expression of opinion as to whether there is not also
another exception, when the agent is engaged in
committing an independent fraudulent act for his
own benefit. On principle it seems it should be so.
If the reason of the general rule is that the law pre-
sumes the agent has discharged his duty of com-
municating his knowledge to his principal, there
seems to be no just ground for denying the second
exception above suggested, for it cannot be fairly
presumed that an agent will communicate to his
principal a fraud intended for his own and not his
principal's benefit. Another reason for the general
rule has been stated, however, and that is that where
one in transacting the business of his principal is
committing a fraud for his own benefit he is not
acting within the scope of his authority as his prin-
cipal's agent, and therefore that his knowledge of
the fraud is not imputable to his princixjal. Speak-
ing of the general rule that the principal is held to
know all that his agent knows in any transaction
in which the agent acts for him, the Circuit Court
of Appeals for the Sixth Circuit, in TJiom son-Hous-
ton Electric Co. vs. Capitol Electric Co., 65 Fed. 343,
12 C. C. A. 645, said:

'This rule is said to be based on the principle of
law that it is the agent's duty to communicate to his
principal the knowledge which he has respecting
the subject-matter of negotiation, and the presump-
tion that he will perform that duty. Such presump-
tion cannot be indulged, however, where the facts
to be communicated by the agent to the principal
would convict the agent of an attempt to deceive and
defraud his principal. The truth is that, where an

34 ^

agent, though ostensibly acting in the business of
the principal, is really committing a fraud for his
own benefit, he is acting outside the scope of his
agency, and it would therefore be most unjust to
charge the principal with knowledge of it.'

Such was also the view expressed by the Circuit
Court of Appeals for the Eighth Circuit in Bank of
Overton vs. Thompson, 118 Fed. 798, 56 C. C. A. 554.
And in Allen vs. South Boston R. Co., 150 Mass. 200,
22 N. E. 917, 5 L. R. A. 716, 15 Am. St. Rep. 185, it
was said:

'The general rule is that notice to an agent,
while acting for his principal, of facts affecting the
character of the transaction, is constructive notice
. to the principal. * * * There is an exception to
this rule when the agent is engaged in committing
an independent fraudulent act on his own account,
and the facts to be imputed relate to this fraudulent
act. It is sometimes said that it cannot be presumed
that an agent will communicate to his principal acts
of fraud which he has committed on his own account
in transacting the business of the principal, and
that the doctrine of imputed knowledge rests upon
a presumption that an agent will communicate to his
principal whatever he know^s concerning the business
he is engaged in transacting as agent. It may be
doubted whether the rule and the exception rest on
any such reasons. It has been suggested that the
true reason for the exception is that an independent
fraud committed by an agent on his own account is
beyond the scope of his emplo;^^nent and therefore
knowledge of it, as matter of law, cannot be im-
puted to the principal, and the principal cannot be
held responsible for it. On this view, such fraud
bears some analogy to a tort willfully committed
by a servant for his own purpose, and not as a means

of performing the business intrusted to him by his
master. Whatever the reason may be, the exception
is well established.'

Speaking on the same subject in American
Surety Co. vs. Patily, 170 U. S. 133, 156-159, 42 L.
Ed. 977, 986-987, Mr. Justice Harlan says:

"The presumption that the agent informed his
principal of that which his dut.y and the interests
of his principal required him to communicate does
not arise where the agent acts or makes declarations
not in execution of any duty that he owes to the
principal, nor within any authority possessed by
him, but to subserve simply his own personal ends or
to commit some fraud against the principal. In
snch cases the principal is not bound by the acts or
declarations of the agent unless it be proved that
he had at the time actual notice of them, or, having,
received notice of them, failed to disavow what was
assumed to be said and done in his behalf.

In Henry vs. Allen, 151 N. Y. 1, 10 (36 L. R. A.
658), the court recognized the general rule. But
after observing that it rested upon the agent's duty
to disclose such facts to his principal, it held that
one of the exceptions was that where the agent was
'engaged in a scheme to defraud his principal, the
presumption does not prevail, because he cannot in
reason be presumed to have disclosed that which it
was his duty to keep secret, or that which would ex-
pose and defeat his fraudulent purpose.'

To the same effect are Benedict vs. Arnoiix, 154
N. Y. 715, and Kettlewell vs. Watson, L. R. 21 Ch.
Div. 685, 707. In the latter case it was said that
the presumption arising from the duty of the agent
to communicate what he knows to his principal
'may be repelled l)y showing that, whilst he was

acting as agent, lie was also acting in another cliar-
acter, viz., as a party to a scheme or design of francl,
and. that the knowledge which he attained was at-
tained by him in the latter character, and that there-
fore there is no ground on which you can presume
that the duty of an agent was performed b}^ the
person who filled that double character.'

In Commercial Bank vs. Cunningham, 24 Pick.
270, 276 (35 Am. Dec. 322), which involved the ques-
tion whether certain notes held by a bank w^ere to
be deemed to have been made for the accommodation
of a firm, one member of which was a director of
the bank at the time the notes were taken, it was
held that the knowledge of the latter, although a
director, was no proof of notice to the corporation,
'especially as he was a party to all these contracts,
whose interest might be opposed to that of the cor-
poration. '

This principle is reaffirmed in Innerarity vs.
Merchants' National Bank, 139 Mass. 332, 333 (52
Am. Eep. 710), in which the court said:

'While knowledge of an agent is ordinarily to
be imputed to the iDrincipal, it would appear now
to be well established that there is an exception to
the construction or imputation of notice from the
agent to the principal in case of such conduct by the
agent as raises a clear presum]3tion that he would
not communicate the fact in controversy, as where
the communication of such a fact would necessarily
prevent the consummation of a fraudulent scheme
which the agent was engaged in perpetrating.'
citing

Kennedy vs. Green, 3 Myl. & K. 699;

Cave vs. Cave, L. R. 15 Ch. Div. 639;

Re European Bank, L. E. 5 Ch. 358;

Re Marseilles Extension Raihvay & L. Co., L.
R. 7 Ch. 161;

Atlantic National Bank vs. Harris, 118 Mass.
147;

Loring vs. Brodie, 134 Mass. 453.

In Terrell vs. Branch Bank at Mobile, 12 Ala.,
502, 507, the question ^Yas as to the liability of the
maker of a note executed in blank and delivered by
him to a director of a bank to be filled up with a
certain sum and to be used in the renewal of a note
of the maker already held by the bank. The direc-
tor (Scott) filled up the note for a larger amount
and had it discomited for his own use, he acting as
one of the directors when the discount occurred, but
concealing the facts from the other directors. It
was contended that the knowledge of Scott as di-
rector of the circLunstances under which the note
was made and offered for discount, his connection
with the directory, and his presence when it was
discounted by the bank, were in law notice to the
other directors of the facts. The supreme court of
Alabama said:

'It cannot be admitted that in receiving the
blank of the defendant to be used for his benefit,
Scott acted as the agent of the bank; and certainly
he did not thus act in abusing the authority con-
ferred on him by the defendant. But in filling up
the blank for a larger amount than his authority
required, and then offering the note for discount, he
was in reality the representative of his own interest.
Pro re nata, his powers as a director were suspend-
ed— ^he was contracting with the bank through his
associates in the directory — he was borrowing, not

lending, its money — tliougli a member of the board
and present too, it cannot be supposed tliat lie co-
operated witli them in purchasing paper of which
he was the avowed proprietor; and whether he did
or not, it cannot be presumed that he made any
disclosure which would prejudice his application for
a loan.'

In his treatise on Equity Jurisprudence, Pom-
eroy says :

'It is now settled by a series of decisions pos-
sessing the highest authority, that when an agent
or attorney has, in the course of his employment,
been guilty of an actual fraud contrived and carried
out for his own benefit, by which he intended to de-
fraud and did defraud his own principal or client,
as well as, perhaps, the other party, and the very
perpetration of such fraud involved the necessity
of his concealing the facts from his own client, then,
under such circumstances, the principal is not
charged with constructive notice of facts known by
the attornev and thus fraudulently concealed.' Vol.
2, Sec. 675.'

Further citation of authorities w^ould seem to be
unnecessary to support the proposition that if Col-
lins gave the certificate that he might, with the aid
of O'Brien as cashier, carry out his purpose to de-
fraud the bank for his personal benefit, the law will
not presume that he communicated to the bank what
he had done in order to promote the scheme devised
by him in hostility to its interests. In our judg-
ment the circuit court of appeals (38 U. S. App. 279,
72 Fed. Rep. 483, 18 C. C. A. 656), correctly held
that plaintiff's right of action on the bond was not
lost because its president, Collins, made to the de-
fendants false representations as to the cashier's

honesty; and tliat when two officers of a corporation
have entered into a scheme to purloin its money
for the benefit of one of them,

'In pursuance of which scheme it becomes nec-
essary to make false representations to a third per-
son, ostensibly for the bank, but in reality to con-
summate said scheme, and for the benefit of the con-
spirators, and not in the line of ordinary routine
business of such officers, and without express au-
thority— the corporation being ignorant of the fraud
— the officers are not, in thus consummating such
theft, the agents of the corporation.'

In Ecdes & Co. vs. L. & N. R. Co., 198 Fed. 898,
900-905, a very recent case, it seems that one By-
water, an agent of the defendant, schemed with other
persons to defraud his company and prospective
shippers, through the execution and negotiation of
fraudulent bills of lading. Persons who were de-
frauded by puchase of these fictitious bills of lading
sued the company, claiming that Bywater in perpe-
trating the fraud was an agent of the company. The
court, however, drew this clear distinction, that when
an agent is performing a non-delegable duty or
where his principal induces third parties to rely on
his representations, then the principal will be bound
by the acts of the agent committed in fraud of the
principal, but that where an agent is not perform-
ing a non-delegable dut}^ or where the principal

places him in such a position as to induce third
parties to rely on his representations, the principal
will be bound by his acts eyen when committed in
fraud of the principal. The court's decision of this
point will be found on x^ages 900-905 and the rule
summed U23 at pages 904-5 in the following lan-
guage :

"It seems quite apparent that the exception to
the general rule is recognized both in the federal
court and in the Alabama court. It does not apply
in either forum to cases in which the principal is
charged with the perf orm.ance of a duty to the per-
son injured, the performance of which he under-
takes to delegate to an agent, who negligenth^ or
willfully fails to perform it. In such case liability
upon the principal ensues, not upon the idea of
notice, but because the duty the agent failed rightly
to perform was the non-delegable duty of the prin-
cipal, the nonobseryance of which he' could not ex-
cuse to third persons by saying that he had in-
trusted its performance to his own agent.

The case at bar is not of this class. If an inquiry
had been made of Bywater by plaintiff as to the
yalidity of the bills of lading inyolyed in the suit
before taking them, and Bywater, in response to
such inquiry which it was the defendant's duty to
haye answered, with knowledge of their infirmity,
had falsely represented them to be genuine or had
fraudulently concealed their infirmity from the in-
quirers, the defendant, being under a duty to dis-
close such inyalidity to the prospectiye holder, would
haye been liable for the failure of its agent, though

without knowledge of such infirmities except
through liim. This was the case of the warehouse-
man decided by Judge Slielby.

Commercial Nat. Bank vs. Nacogdoches Com-
press <f Warehouse Co., 133 Fed. 501, 66 C.
C. A. 375. .

On the contrary, in the case at bar no inquiry
was made by the plaintiff of B^^water as to the
validity of any of the bills of lading which are the
basis of the suit. Neither Bywater nor the defend-
ant is shown to have had any knowledge of their
existence before they were negotiated to plaintiff,
nor was any action required or taken by him or it
with reference to them."

It will be seen therefore that McCoy's acts in
the instant case in the execution and negotiation of
the checks in question were not performed in the
scope of his employment but in violation thereof
and in fraud of his principal. His knowledge, and
his acts and intentions are not imputable to this
plaintiff and the checks therefore are not made pay-
able to bearer.

Under the principle announced in the last quota-
tion which we believe to be good law, the Govern-
ment would be bound by McCoy's signature in exe-
cuting this paper. The bank had a right to rely on
it and if McCoy's signature on these checks were
the prominate cause of the loss in this case the

Government could not recover. McCoy, however,
was not the agent of the Government to receive pay-
ment or to make any representations as to the au-
thenticity of the signature or identity of the payee.
So that his knowledge is not imputable to the Gov-
ernment and does not make these checks payable to
bearer and the Government is not bound by his
fraudulent intention when he made the checks pay-
able to fictitious persons. His endorsement of them
was a forgery and the bank is liable.

The foregoing principle, namely, that the knowl-
edge of the agent who is engaged in a fraud of the
principal is not the knowledge of the principal is,
we believe, by the great w^eight of authoritj^ and in
reason applicable to the instant case.

Harmon vs. Old Detroit National Bank
(Mich.), 116 N. W. 617, 17 L. E. A., N. S.
514;

Chism vs. First National Bank, 96 Tenn. 649,
32 L. R. A. 778, 54 Am. St. Rep. 863, 36 S.
W. 387;

Shipman vs. Bank, 126 N. Y. 318, 12 L. R. A.
791, 22 Am. St. Rep. 821, 27 N. E. 371;

Armstrong vs. National Bank, 46 Ohio State
512, 6 L. R. A. 625, 15 Am. St. Rep. 655, 22

N. E. 866.

In the Harmon case the court found that the

plaintiff did not intend the check in question to be
made to a fictitious person, but intended the pa3^ee to
be real. Plaintiff was, however, imposed upon by
the fraud of his clerk, who knew of the fictitious
character of the payee.

In the Chism case the plaintiff was imposed upon
b}^ a third party who represented himself as the
agent of a non-existing person and procured the
plaintiff to deliver to him a check drawn in favor
of this non-existing person. The third party there-
upon forged the name of the fictitious payee to an
endorsement of the check and procured its pa}^ment
to himself.

In the Armstrong case the facts are practically
identical with those in the Chism case. In none of
these cases was the question raised that the knowl-
edge of the agent was the knowledge of the princi-
pal. In the Harmon case, plaintiff's own clerk was
engaged in defrauding him. In the Chism case and
in the Armstrong case, plaintiff adopted as his agent
to deliver the check to the su^Dposed payee, the per-
son who was defrauding him. In allowing a re-
covery in those three cases the court necessarily
adopted the principle that the knowledge of the

agent is not the knowledge of the principal or it
would have found for the defendant.

The facts in the Shipman case resemble in the
main those in the Harmon case, and the question
was squarely raised and decided hj the court:

"The indorsement of the names of the fictitious
payees upon the checks, with intent to deceive and
to put the checks in circulation, constituted the
crime of forgery, by means of which, and without
any fault of the plaintiffs, payment was obtained
thereon. The defendant does not occup}^ any dif-
ferent position with reference to the checks pay-
able to fictitious payees than it does with reference
to those payable to real parties whose indorsements
were forged. Bedell, of course knew that the payees
were fictitious, but he was not acting within the
scope of his emplo}inent, but in carrying out a
scheme of fraud upon the plaintiffs, and under such
circumstances his knowledge cannot be imputed to
his principals."

As sustaining the above quotation the court cite :

Frank vs. Chemical National Bank, 84 N. Y.
209;

Weisser vs. Deyiison, 10 N. Y. 68;

Welch vs. German-American Bank, 73 N. Y.
424;

Cave vs. Cave, L. R. 15, Ch. Div. 643, 644.

The case of Snyder vs. Corn Exchange National
Bank (Penn.), 70 Atlantic 876, apparently following

the doctrine of Phillips vs. Mercantile National
Bank, 140 N. Y. 556, 35 N. E. 982, 23 L. R. A. 584,
37 Am. St. Rep. 596, is authoritj^ to the contrary.
The New York and Penns3dvania courts attempted
to distinguish the doctrine of those cases from the
Shipman case upon the groimd that in the latter
case the signature on the check was the manual act
of the principal induced by the fraud of the guilty
agent, while in the Snyder case and in the Phillips
case the guilty agent had authority to execute the
paper and did so on behalf of his principal. Wg
fail to see, however, why the delegation of authority
to execute the instrument should render the knowl-
edge of the guilty agent imputable to the principal
in one case when the fraud of the agent inducing the
manual act on the principal does not have the same
result.

There is another consideration, however, which
precludes the ax)plication of the doctrine of the
Phillips and Snyder cases to the decision of the
case at bar, and that is the fact that M. P. McCoy
was by law prohibited from making any check
payable to bearer and this defendant is chargeable
with knowledge of that fact.

The regulations of tlie Departments of Govern-
ment made pursuant to law have the force of law
and are judicially noticed by the court.

Caha vs. United States, 152 U. S. 211, 38
Ed. 415;

Cosmos Exploitation Co. vs. Gray Eagle Iron
Co., 190 U. S. 301, 47 L. Ed. i064.

Section 5153 U. S. R. S. provides:

''All national banking associations, designated
for that purpose by the Secretary of the Treasury,
shall be depositaries of public money, under such
regulations as may be prescribed by the Secre-
tary; * * * "

This defendant is a national depositary, and as
such received the deposit in question pursuant to
the above section.

Pursuant to the same authority which has ex-
isted in practically the same form since its enact-
ment as Section 45 of the Act of June 3, 1864, Sec-
retary Shaw on April 16, 1903, by Department Cir-
cular No. 49, promulgated the following regulation,
which is still in force:

"6. If the object or purpose for which any
check of a public disbursing officer is drawn is not
stated thereon, as required by departmental regula-
tions, or if any reason exists for suspecting fraud,

the office or bank on which such check is drawn
will refuse its payment.

The same authority on December 7, 1906, in De-
partment Circular No. 102, quoted Sections 3600
and 5488 U. S. E. S. and promulgated the follow-
ing regulations:

''Any check drawn by a disbursing officer upon
moncA'S thus deposited must be in favor of the
party, by name, to whom the payment is to be made,
and payable to 'order,' with these exceptions:

(1) To make payments of amounts not ex-
ceeding $20, (2) to make payments at a distance
from a depositary, and (3) to make payments of
fixt salaries due at a certain period; in either of
which cases any disbursing officer ma^^ draw his
check in favor of himself, or 'order,' for such
amount as may be necessary for such payment, but
in the first and last named cases the check must be
drawn not more than two da3^s before the payments
become due. Any disbursing officer or agent draw-
ing checks on moneys deposited to his official credit,
must state on the face or back of each check the ob-
ject or purpose to which the avails are to be ap-
plied, except upon checks issued in payment of indi-
vidual pensions, the special form of such checks in-
dicating sufficiently the character of disbursement.
If the object or purpose for which any check of a
public disbursing officer is drawn is not stated
thereon, as required, or if any reason exists for sus-
pecting fraud, the office or bank on which such check
is drawn will refuse its payment.

Such statement may be made in brief form, but

must clearly indicate the object of the expenditure,
as, for instance, 'pay,' 'pay roll,' or 'payment
of troops,' adding the fort or station, 'purchase of
subsistence,' or other supplies; 'on account of con-
struction,' mentioning the fortification or other pub-
lic work for which the payment is made; 'payments
under $20,' etc.

Any check drawn by a United States disbursing
officer payable to himself, or 'order,' 'to make
payments of amounts not exceeding twenty dollars
each,' under the provisions of this circular must
bear indorsed thereon the names of the persons to
whom the amount drawn is to be paid, or be accom-
panied by a list, or schedule, made a part of the
check, containing the same information."

Section 310 U. S. R. S. in part reads as follows:

"* * * And each disbursing officer shall make
a like return of all checks issued by him, and which
may then have been outstanding and unpaid for
three years or more, stating fully in such report the
name of the payee, for what purpose each check was
given, the office on which drawn, the number of the
voucher received therefor, the date, number, and
amount for which it was drawm, and, when known,
the residence of the payee."

Section 3648 is in part:

"No advance of public money shall be made in
any case whatever. And in all cases of contracts for
the performance of any service, or the delivery of
articles of any description, for the use of the United
States, payment shall not exceed the value of the
service rendered, or of the articles delivered previ-
ously to such payment." * * *

Every person who dealt with or accepted a check

of McCoy was charged with the knowledge that as a
Government agent his powers were delegated and
therefore limited by law and was also chargeable
with the knowledge of the statutes and the regula-
tions promulgated pursuant thereto and which have
been quoted above. Referring to Section 3648 the
Supreme Court in The Floyd Acceptances, 7 Wall.
666, 19 L. Ed. 169, 176, say:

"The transactions by which these drafts were
accepted was in direct violation of this law, and of
the limitations wiiich it imposes upon all officers of
the Government. Every citizen of the United States
is supposed to know the law, and when a purchaser
of one of these drafts began to make the inquiries
necessary to ascertain the authority of their accept-
ance, he must have learned at once that, if re-
ceived by Russell, Majors or Waddell, as pa3anent,
they were in violation of law, and if received as ac-
commodation paper, they were evasions of this law,
and without any shadow of authority."

Quoting further from the same case :

''Whenever negotiable paper is found in the
market purporting to bind the Government, it must
necessarily be by the signature of an officer of the
Government and the purchaser of such paper,
whether the first holder or another, must, at his
peril, see that the officer had authority to bind the
Government.

When this inquiry arises, where are we to look
for the authority of the officer ?

The answer, which at once suggests itself to one

familiar with the structure of our Government, in
which all power is delegated, and is defined by law,
constitutional or statutory, is, that to one or both of
these sources we must resort in every instance. We
have no officers in this Government, from the Pres-
ident down to the most subordinate agent, who does
not hold office under the law, w^ith prescribed duties
and limited authority. * * *

It cannot be maintained that, because an officer
can lawfully issue bills of exchange for some pur-
poses, that no inquiry can be made in any case into
the purpose for which a bill was issued. The Gov-
ernment cannot be held to a more rigid rule, in this
respect, than a private individual.

If A authorizes B. to buy horses for him, and to
draw on him for the purchase money, B cannot buy
land and bind A by drawing on him for the price.
Such a doctrine would enable a man, in private life,
to whom a well defined and limited authority was
given, to ruin the principal who had conferred it.
So it would place the Government at the mercy of
all its agents and officers, although the laws under
which they act are public statutes. This doctrine
would enable the head of a Department to flood the
country with bills of exchange, acceptances, and
other forms of negotiable paper, without authority
and without limit. No Government could protect
itself, under such a doctrine, by any statutory re-
striction of authority short of an absolute prohibi-
tion of the use of all commercial paper."

The following cases accept the authority of The
Floyd Acceptances for the doctrine that all persons
dealing mth commercial paper of the Government

- 51

must at their peril ascertain the authority of the
public agent to execute it:

MarsJi vs. Fulton County, 10 Wall. 676, 683;

The Mayor vs. Bay, 19 Wall. 468, 478;

Mercliant's Bank vs. Bergen Goimty, 115 U.
S. 384, 390-391;

Pine Biver Logging Co. vs. U. S., 186 U. S.
279, 291.

The questions arise, therefore, whether McCoy
had authority to issue a check payable to a fictitious
payee and if not, whether the bank either is charge-
able with knowledge of that fact or whether it, in
dealing with his pajDer, must at its peril ascertain
whether the payee was a real or fictitious person.

We believe it admits of no question that McCoy
lacked authority to issue a check payable to a ficti-
tious payee. The provisions of Department Circu-
lar No. 102 of December 7, 1906, are to the effect
that any check drawn by a disbursing agent must be
in favor of the party, hy name, to whom the pay-
ment is to be made and payable to "order," with
certain exceptions. In the exceptional cases the
agent is allowed to draw the check in favor of him-
self or "order." This language does not require con-
struction. All it needs is enforcement and McCov's

lack of authority is too plain to admit of question.

Under the decisions of Caha vs. United States,
supra, and Cosmos vs. Gray Eagle Iron Co., supra,
the Department regulations have the force of law
which everybody is presumed to know. The bank,
therefore, is chargeable with notice of McCoy's lack
of authority and under the doctrine laid down in
The Floyd Acceptances, supra, not only this de-
fendant bank, but every person dealing with Mc-
Coy's paper, is required at his peril to ascertain the
agent's authority to execute the same. They were
required to know as a matter of law, that if the name
of the payee on McCoy's check was not the name
of the real person who rendered the service or deliv-
ered the article for the use of the Government, it
must be the name of McCoy. A requirement by the
bank that the payee be identified and the authentic-
ity of his signature established would have prevent-
ed the loss to the Government. Such precautions are
no more and no less than the contract which the
defendant bank and every other bank dealing with
this paper engaged to perform. It is the violation
of that duty which is the proximate cause of the loss
in this case and the defendant is liable.

Oue other consideration may be urged on the
court to prevent a recovery in this case and that is
section 3363 of Rem. and Bal. Washington Code, be-
ing the Laws of 1907, page 31, Section 1, which pro-
vides that:

"No bank or trust company shall be liable to a
depositor for the payment by said bank or trust
company of a forged or raised check, unless within
60 days after the return to the depositor of the
voucher of such pa^^nent, such depositor shall notify
the bank or trust company that the check so paid
was raised or forged. ' '

The trial judge however, and we believe correctly,
held that the state statute of limitations could not
be effective as against the Government, in accord-
ance with the rule laid down in United States vs.
Thoyyipson, 98 U. S. 486, 25 L. Ed. 194. In fact the!
Circuit Court of Appeals for the Second Circuit has
allowed recovery by the Government in a case
w^here the forgery of the paj^ee's name was not dis-
covered for two years. That fact was held to be no
defense.

Oyiondaga Goimty Savings Bank vs. United
States, 64: Fed.'lOS.

We know of no further objections that could be
made to the recoverv bv the Government in this

case and submit that the granting of the non-suit
was error.

THE COURT ERRED IN OVERRULING
THE DEMURRER TO DEFENDANT'S SEC-
OND AFFIRMATIVE DEFENSE IN THE
ORIGINAL COMPLAINT (Record, pp. 13-14),
THE SAME BEING PRACTICALLY THE
FIRST AFFIRMATIVE DEFENSE IN THE
AMENDED COMPLAINT (Record, pp. 22-23).

The foregoing discussion contains all that could
be said on this question and the court is now suffi-
ciently informed of the contention of the Govern-
ment and we believe it appears from those princi-
ples that no fact set up in the alleged affirmative
defense constitutes any bar to this action.

ERBORS IN ADMISSION AND REJECTION
OF EVIDENCE.

These errors group themselves under two heads,

First, Those in which the court permitted McCoy

to testify to the contents of writings of which copies
could be produced, and,

Second, The exclusion of McCoy's oral testimony
and the exhibits relating to the method whereby the
vouchers were prepared and showing the purposes
for which the checks were drawn.

The error in permitting McCoy to testify to the
contents of written instruments is one too plain to
rec[uire the citation of authority.

The error in excluding McCoy's testimony and
in rejecting the vouchers as exliibits depends not
so much on principles of law as it does upon the
materiality as a matter of fact of these exhibits to
the plaintiif's case. The plaintiff submits that if
this case shall be retried, this testimony should be
presented to the .jury. It is necessary to an under-
standing of the whole transaction. It places before
the jury facts which the defendant bank could have
had upon inquiry and with the knowledge of which
they should therefore be charged. This line of evi-
dence undoubtedly would have great weight with a
jury in determining whether or not the manner in
which the Government conducted its business was
such that this defendant in failing to require an
identification of the payee has caused the loss of the
money sued for and should therefore respond m
damages.

The judgment of the United States District
Court in this cause should be reversed and the case
remanded for a new trial.

Respectfully submitted,

B. W. COINER,

United States Attorney.

C. F. RIDDELL,
Assistant United States Attorney.

IN THE

Hntt^i S^Mm Ctrrmt ffinurt

FOR THE

NINTH CIRCUIT

UNITED STATES OF AMERICA

Plaintiff in Error

NATIONAL BANK OF COM- } ^°- ^^^^
MERGE OF SEATTLE, a Cor-
poration,

Defendant in Error.

Upon Writ of Error to the United States District Court

for the Western District of Washington,

Northern Division.

BRIEF OF DEFENDANT IN ERROR

STATEMENT

During the years 1907, 1908, and 1909, M. P.

McCoy was an Examiner of Surveys and Special

Disbursing Agent for the United States. The

National Bank of Commerce of Seattle was a

government depositary. The United States de-
posited with the National Bank of Commerce large
sums of money at various times during the
years to the credit of ''M. P. McCoy, Examiner of
Surveys and Special Disbursing Agent." McCoy
was directed by letter from the Treasury Depart-
ment to leave his signature with the National
Bank of Commerce, to draw checks upon that
bank, and to sign the checks "M. P. McCoy, Ex-
aminer of Surveys and Special Disbursing
Agent." This letter of instructions was shown by
McCoy to the bank, and it contained no limitation
upon his right to check against the account; his
authority under said letter of instructions to draw
the money upon his own order was unlimited. (Rec-
ord, pp. 69, 81, 82.)

Between October, 1907, and August 31st, 1909,
upon checks so drawn, the bank paid out $15,129.-
81, as stated in the complaint. The checks in
question were drawn by McCoy to fictitious payees.
He endorsed the name of the fictitious payee upon
the check and caused the check so endorsed to be
deposited in another bank and the proceeds placed
to his account under another fictitious name. The
names that he used in opening up accounts in other

banks were F. M. Clark and J. D. King. (Record,
p. 65.)

McCoy made weekly reports to the government,
and monthly and quarterly rendered vouchers for
all of his expenditures. The bank every month
rendered a statement to the government and to
McCoy as to the condition of the account and
quarterly returned to the government all the
vouchers that it had paid upon McCoy's order.
The government was thus advised monthly and
quarterly by the bank of the status of the ac-
count and the government was given the names
of the persons to whom the checks were drawn,
and the reports of McCoy to the government, also
made quarterly, gave in detail the expenditures
and the purposes for which the expenditures were
made.

The testimony shows that all of the payees
were fictitious and that McCoy, the agent of the
government, had systematically, during the entire
time above mentioned, attempted to defraud the
government and had been unfaithful to his trust.
He was arrested in September, 1909, and convict-
ed, served his sentence in the penitentiary and had
been paroled, and his testimony is practically the

sole testimony upon which the government relies.
The evidence shows that he had never been par-
doned nor had his civil rights been restored to him.

During the period that the checks in question
were drawn McCoy had honestly performed cer-
tain work for the government in the examination
of surveys, and had expended honestly for the
government from $1000 to $4000 (Record, pp. 61,
77, 79) and expenditures to this amount were paid
from the money that McCoy fraudulently had in his
possession. All of the checks drawn upon the de-
fendant bank bore the genuine signature of McCoy,
in whose name the deposit was made.

The government in its complaint insists that
the money was paid out by the bank on these
checks wrongfully and without authority and
seeks to recover from the bank the money so paid
out.

The government failed to make any investiga-
tion or inquiry as to the accounts of its agent
from 1907, when the frauds commenced, until
1909; failed to ascertain, as it could easily have
done, that McCoy was acting fraudulently and that
he was not doing the work nor expending the money
that he represented he had expended, when a slight

inquiry would have disclosed the fraud and pre-
vented its continuance, and would have prevented
the loss which has been sustained by some one
through the negligence of the igovernment and
through the fraud of its agent.

The plaintiff not only failed to discover the
forgeries or to notify the bank of any irregulari-
ties in the accounts, but failed to make a demand
for the money until six months after the forgeries
were discovered. The failure of the government
to examine the returns made by the bank and to
report errors in time was a cause of the successful
practice or continuance of the frauds and was
necessarily detrimental to the defendant. The in-
jury could not have occurred had the government
performed its duty and examined the returns and
had verified their truthfulness.

The defendant in its answer pleaded the stat-
ute of the State of Washington which provides
that when a bank renders a statement of account
to a depositor such depositor must within sixty days
notify the bank of any errors or forgeries, and if
the depositor fails to so notify the bank within
such time that no suit can be prosecuted. The
demurrer to this defense was sustained.

The defendant also contended that the deposit
was made by the government in the name of McCoy
in the usual and customary manner as deposits are
ordinarily and customarily made by an individual
?reditor\was established; that it became the duty
d^po&iter\and thar^^^Iie~~relation of debtor and^
of the defendant to pay the checks drawn by Mc-
Coy against said deposits and that such checks were
paid from time to time as the same were presented
and that the checks were, under the negotiable in-
strument act of the State of Washington, made
payable to bearer. That statements of account
were rendered monthly to McCoy and to the govern-
ment and that the duty was imposed upon the gov-
ernment to examine such accounts within a reason-
able time and to report any discrepancies; that
the government failed to do this for an unreason-
able length of time; failed to notify the bank of
any forgeries, or any irregularities in the state-
ments; that no complaint was made of any im-
proper payment of the checks and that the failures
of the plaintiff to promptly notify the defendant of
the forgeries or fraud resulted in damage to the
defendant in the amount of the checks and pre-
vented it from protecting itself against future

forgeries or fraud, and that the plaintiff was
estopped to recover from the bank on account of its
negligence and dilatoriness in investigating the
acts of its agent that caused the fraud and in
promptly notifying the defendant thereof. De-
fendant also contended that a considerable part of
the money that was so fraudulently drawn by
McCoy was expended by him in the payment of
legitimate claims against the government. (Rec-
ord, pp. 12, 22, 23.)

After the testimony of the plaintiff had been
introduced the defendant made its motion for a
non-suit, whch was granted by the Court, and the
government has appealed from the action of the
Court in granting the non-suit and dismissing the
action.

ARGUMENT

While the plaintiff has assigned numerous
errors, the principal error upon which it relies
seems to be the action of the Court in granting the
non-suit, so that as counsel for plaintiff have seen
fit to base their argument for the most part upon
the action of the Court in granting the non-suit,
we shall follow in our argument the course adopted

by counsel for plaintiff; and a discussion of the
action of the Court in granting a non-suit brings
before this Court the entire record in the case.

FAILURE TO RETURN CHECKS.
One of the grounds stated by the Court in grant-
ing the motion for non-suit was that the govern-
ment had failed, upon the discovery of the forgeries
or frauds to return the checks to the defendant, and
the Court said:

*'As the matter rests in my mind now, it seems
to me like a difficult point to get over in this case
would be that the checks were not returned. The
right to recourse against the banks through which
these checks came to the defendant bank would, ac-
cording to ordinary banking rules, depend upon the
return of the endorsed paper, and the government
is held to observe the business rules which obtain
with business men in business transactions, and
the government is not allowed to assert a right
while committing a wrong. If it was wrong to
withhold these checks, it is not right to make the
defendant bank pay." (Record, p. 113.)

And again, on page 115 of the Record, the Court
said:

'The case of United States against National
Exchange Bank, 214 U. S., 302, decides one point,
and that is that the rule requiring prompt notice to
be given of the invalidity of commercial paper is
an exception to the general rule, the general rule

being that where money is paid by mutual mistake
the mistake can be corrected and the matter ad-
justed according to the rights of the parties. Now
the exception that is made in the law is where
notice of a mistake is not promptly given and after
a lapse of reasonable time, if no notice is given, the
party who has made the mistake is protected
against bringing up the matter to be readjusted.

Now the Supreme Court decided that the excep-
tion does not apply except in those matters where
the party who should give the notice is in a position
to have knowledge of the mistake. It does not ap-
ply as against the government when checks are
paid on fraudulent indorsement of payees, because
the government does not know the payees, does not
know their signatures, is not in a position so as to
have the information so as to give notice of a mistake
of that kind ; therefore the rule does not apply. The
argument to be drawn from that is that, in accord-
ance with other decisions of the Supreme Court of
the United States, the government is bound by the
business rules that apply to the handling of com-
mercial paper. As said by Judge Miller, the gov-
ernment itself is as much interested, if not more
interested, than anybody else, in the value of con-
fidence in handling commercial paper, and for that
reason it is as much bound as private individuals
are to the reasonable rules of business that are pre-
scribed and followed for the protection of people
who repose confidence in handling commercial
paper. The defendant was not obligated to pay
any of these checks except on presentation at its
banking house in Seattle by the payee, and upon
being satisfied of his identity, but in accordance
with commercial usages, it acted with reasonable
business prudence in taking these checks, ac-
companied by an endorsement which guaranteed or

warranted the genuineness of the signature of the
payee; I mean taking these checks from another
bank; and having done so it is entitled to be treat-
ed fairly in the matter of protecting its rightful
recourse against the prior endorsers. I think es-
sential to that right was the return of the checks
or a tender of them. If I am not greatly mistaken
in my understanding of banking business and the
rules of law, this defendant upon being informed
that the payees named in these checks were ficti-
tious persons, and the endorsements of their names
on the checks were forgeries, and that the checks
were In the custody of the United States District
Attorney, and that permission would be given to
inspect them and take copies therefrom, would
not on receipt of that notice or that kind of infor-
mation have any legal ground to go to another
bank from which the check had been received with
guarantee and say: 'Here, that guarantee of
yours has caused me to lose money and I require
you to pay back the money that I paid on this
check;' I don't believe the defendant bank could
go to another bank and make a demand of that
kind on that kind of showing or that state of facts.
It would have the right to take the check and throw
it down on the counter and require the money to
be returned to it. I will grant the motion for a
non-suit."

The government not only failed to return the

alleged forged paper to the defendant, but retained

the same until the trial of this case and introduced

the fraudulent checks as evidence therein. If the

defendant had sought to maintain an action against

the banks from whom it received these checks, we

fail to see how such action could have been success-
fully maintained without the introduction of the
checks in evidence. The evidence of these checks
would have been indispensible to the successful main-
tenance of an action against the banks that received
the money from the defendant. It could not be
shown on the trial of such case that the checks had
been lost or destroyed, but it would have appeared
that the checks were in existence in the hands of
the government that refused to surrender them,
and with the checks admitted to be in existence and
in the hands of the government any such action
against the other banks would necessarily have
failed.

But whether or not the Lower Court was right
in its view as to the necessity of the return of the
checks would not affect the correctness of its action
in granting the non-suit if such action was right
and supported by other principles of law. But we
think that the position of the Court was clearly
right.

Any action that the defendant would bring
against the other banks would be necessarily based
upon the liability of the collecting banks upon their
endorsement of the checks; the question of the

12 . •

genuineness of the checks would be one of the pivot-
al questions in any such suit and we are utterly
unable to determine how such action could be sus-
tained without the production of the alleged forged
paper. The endorsing bank would become liable
upon its endorsement which guaranteed the gen-
uineness of the paper. The proof of the endorse-
ment and of the lack of genuineness of the paper
could not be sustained, it seems to us, without the
production of the paper which the government has
withheld up to this time and still refuses to turn
over to the defendant bank.

The general rule is that the party to whom
forged or counterfeit obligations pass must notify
the party from whom they were received immedi-
ately and must tender to him the instruments them-
selves, "and the party receiving such notes must
examine them as soon as he has opportunity and
return them immediately." If he does not, he is
negligent, and negligence will defeat his action.

Cooke vs. U. S., 91 U. S., 395.

Gloucester Bank vs. Salem Bank, 17 Mass.,
45.

' 13

"One who has received such counterfeit bills
or notes in payment of his debt must return, or
offer to return them in reasonable time or he will
forfeit his rights to recover the amount of them
from the payer."

National Exchange Bank vs. United States,
151 Fed., 405.

In the case of the United States Bank vs. Bank

of Georgia, 10 Wheat., 333, Mr. Justice Story said:

''If this doctrine be applicable to ordinary
cases it must apply with greater strength to cases
where the forgery has not been detected until after
a considerable lapse of time. The holder, under
such circumstances, may not be able to ascertain
from whom he received them, or the situation of
the other parties may be essentially changed.
Proof of actual damage may not always be within
his reach; and therefore, to confine the remedy to
cases of that sort would fall far short of the actual
grievance. The law will, therefore, presume a
damage, actual or potential, sufficient to repel any
claim against the holder. Even in relation to forged
bills of third persons, received in payment of a
debt, there has been a qualification ingrafted on
the general doctrine that the notice and return
must be within a reasonable time, and any neglect
will absolve the payer from responsibility."

The case cited by counsel of United States vs.

Onondaga Savings Bank, 39 Fed., 259, is based upon

the decision in the case of United States vs. Central

Bank, 6 Fed., 134, but the Court in National Ex-

change Bank vs. United States, 151 Fed., 402, holds
that the case of Cooke vs. United States, 91 U. S.,
359, is authority for the contention that there must
be an immediate notice of the discovery of the
forgery and a return of the documents.

If the defendant in this case had brought an
action against the Seattle National Bank, through
which bank some of the checks were paid, what sort
of an action would it have been? Would it have
been one sounding in tort or one based upon con-
tract? Manifestly it must be an action upon the
contract of endorsement upon the check, and as
there were numerous checks, possibly passing
through numerous hands, it must be apparent that
the production of the check must be made to the
Seattle National Bank before the return of the
money and no suit could be successfully maintained
with these checks in existence and not produced
at the trial. Had the action been one in tort, the
statute of limitation would be three years. This
suit was not commenced until December, 1910,
more than three years after a large part of the
checks had been paid by the National Bank of
Commerce; so that if defendant, as suggested in
the Onondaga case had a remedy apart from the

check the statute of limitation had already run
before notice of the forgeries was given by the
government to the National Bank of Commerce.

Counsel also cite the case of Leather Manu-
facturers National Bank vs. Merchants' National
Bank, 128 U. S., 26, but that case does not touch
upon the rule that it was the duty of the govern-
ment to return the checks immediately upon the
discovery of the forgeries.

FICTITIOUS PAYEES.

But it is immaterial whether the lower Court
was correct in giving one reason for granting the
motion for non-suit if his judgment can be sus-
tained upon any ground. This Court will bear in
mind that M. P. McCoy, Examiner of Surveys and
Special Disbursing Agent, was the party in whose
name the deposit was made upon the books of the
National Bank of Commerce. His signature was
furnished to the National Bank of Commerce by
the direction of the Secretary of the Treasury; the
bank was notified that McCoy was the only person
authorized to draw checks upon that account; he
was clothed by the government with authority to
issue checks upon this fund; the government ap-

pointed him as its agent to issue negotiable paper
and to place the same in circulation. McCoy af-
fixed his genuine signature to each of the checks
in controversy; he made the checks payable to
fictitious payees and endorsed the checks in the
names of the payees and through the agency of
other banks succeeded in getting the money into
his own possession.

"A check is a bill of exchange drawn on a
bank, papable on demand. Except as otherwise
herein provided, the provisions of this act appli-
cable to a bill of exchange payable on demand apply
to a check."

2d Rem. & Bal. Code, Sec. 3575.

"A bill of exchange is payable to bearer:
'When it is payable to the order of a fictitious or
non-existing person and such fact was known to the
person making it so payable."

2d Rem. & Bal. Code, Sec. 3400, Sub-div. 3.

"Where the drawer of a check intended to
use the name of payee and did use it, as that of a
person who should never receive the check nor have
any right to it, such payee, though an existing
person, was a fictitious one within the negotiable
mstruments act of May 16, 1901, making a check
payable to bearer, if payable to the order of a
fictitious or non-existing person, and such fact
IS known to the person making it so payable."

Snyder vs. Corn Exch. Nat'l Bank, 70 Atl,
876.

''As the payee had no interest and it was not
intended he should ever become a party to the
transaction, he may be regarded, in relation to
this matter, as a nonentity, and it is fully settled
that when a man draws and puts into circulation
a bill which is payable to a fictitious person the
holder may declare and recover upon it as a bill
payable to bearer."

Snyder vs. Corn Exch. Bank, supra.

In the case of Phillips vs. Mercantile National
Bank of New York (140 N. Y., 556; 35 N. E., 982;
23 L. R. A., 584,) the Cashier of the National Bank
of Sumpter, S. C, had authority from it to draw
checks or drafts upon the Mercantile National
Bank of New York, where it had an account. He
drew checks upon that bank making them payable
to the order of existing persons, but without their
knowledge, and then endorsed the checks in their
names to a firm of stockb^i^efs in New York, who
collected them from the Mercantile Bank. The
Receiver of the Sumpter Bank brought suit against
that bank to recover back the amounts which it had
paid on Bartlett's checks, on the ground that the

18 .

endorsements of the names of the payees were for-
geries. It was held that there could be no recovery
because the checks had been made payable to ficti-
tious prsons, even though the names adopted were
those of existing persons, and were therefore to
be regarded as having been made payable to bearer
and intended for delivery to stockh^S^s in New
York. This having been the intent of Bartlett,
who had authority from his bank to draw the
checks, his intent — so far as the New York Bank
was concerned — was said to have been the intent of
his bank and that whatever he did in drawing and
delivering the checks was to be regarded as its act.
In the course of its opinion the Court in that case
said:

"Whether endorsing the check in the name of
the payee therein was a forgery in the legal sense
or not is not the important question. In a general
sense, of course, the cashier did forge the payee's
name, but that act did not affect the title or rights
of the defendant."

In this case it cannot be successfully main-
tained that McCoy did not know at the time he drew
the checks that they were made payable to fictitious
persons. It is true that he intended to perpetrate
a fraud, but the statute does not say that the draw-
er of the check shall have knowledge of the ficti-

tious or non-existing payee, but the fact must be
known to the person making the check so payable.
The statute does not limit the case to drawers of
checks or makers of negotiable paper, but goes
farther and applies not only to the maker but to
the person who has the power to draw the instru-
ment and to put it into circulation.

Counsel on page 23 of their brief contend that
the United States was the maker of these checks.
In a sense that is true; but the statute goes farther
and makes the paper payable to bearer if the fact
of the fictitious payee is known to the person
making it so payable. But we do not agree with
counsel that the drawer of the check, within the
meaning of the rule as to fictitious payees, was the
United States. We contend that the drawer of the
checks was M. P. McCoy, Examiner of Surveys
and Special Disbursing Agent. When the govern-
ment placed the deposit in his name it parted with
the title to the money so deposited, and it became
the money of McCoy so far as the legal title was
concerned and the relation of debtor and creditor
was established between the bank and McCoy as the
agent of the United States.

In the case of United States vs. National Ex-

change Bank, 45 Fed., 163, a party feloniously and
by false identifications succeeded in procuring a
check from the postmaster of Milwaukee; the check
was made payable to the party entitled to receive
the money, but it was delivered to a party not
entitled to it, the postmaster acting in good faith
in issuing the check and delivering it to such im-
poster. The bank paid the check and paid it to the
identical person to whom the postmaster intended
it to be paid. In that case the postmaster kept his
account in the same way that McCoy kept his
account with the National Bank of Commerce. He
went with the imposter to the bank and identified
him, and upon such identification the bank paid
the check. Subsequently the government brought
suit against the bank for the recovery of the money,
and the Court held that the bank was not liable
for the reason that the money was paid to the per-
son to whom the postmaster intended it should be
paid.

In this case the bank paid the money to the
person that McCoy intended should receive it.
McCoy put the paper into circulation and through
his acts, representing the government, caused the
money to be paid to the wrong person. The Court

held that the bank was not in fault and that the
government was not necessarily in fault and there-
fore allowed the loss to fall where chance placed it,
viz: upon the government.

The case of Hermon vs. Old Detroit National
Bank (116 N. W., 617; 17 L. R. A., N. S., 514)
cited by counsel, distinguishes the case of the United
States vs. National Exchange Bank, 45 Fed., 163.
In that case the Court says :

"In that case, the drawer of the check, the
postmaster, went with the fraudulent payee to the
bank and identified him as the payee named in the
check. In that case the fault was, of course, with
the drawer and not with the drawee. To render
that case applicable to this it should have appeared
that the proper officer of the railroad company
went to the bank and identified the payee."

And in the same case the Court says that the
statute in question relating to fictitious payees ap-
plies only in cases where the drawer knowingly
draws the check to the order of a fictitious payee.
But in the Harmon case the Court recognized the dis-
tinction that we are endeavoring to present, i. e.,
that McCoy and the postmaster occupy similar
legal positions: both the agents of the government;
both had the deposit placed in their names; and in
the Harmon case the Court clearly recognized the

authority of the postmaster, who was only a special
agent of the government, to draw the check and
identify the payee, or to make the check payable
to bearer, and that by doing so he relieved the bank
of any liability for paying it to the wrong person.
McCoy, in drawing the checks, was acting in the
line of his duties and had the right to draw checks
upon the deposit of the government to which he had
the legal title, and there is no reason that occurs
to us why a different rule should prevail in the
case of the government from the rule that does
prevail against private individuals. If the agent
acts within the scope of his powers the govern-
ment is necessarily bound by his acts. When the
government enters into the business of dealing in
negotiable paper it becomes bound by the laws regu-
lating the issuance of negotiable paper to the same
extent and in the same way that a private individ-
ual is bound. It is subject to the same rules and the
same regulations that control private individuals.
In its sovereign capacity it is free from suit with-
out its consent and the statute of limitations and
laches do not bind it; but when it becomes a party
to a negotiable instrument it is bound exactly like
other parties. The duty of giving notice of pro-

test, of making demand, and various other duties

imposed by the law merchant have been held to

apply to the United States.

In the case of Cooke vs. United States (91 U.

S., 395,) the Court says:

''Laches is not imputable to the government
in its character as sovereign by those subject to
its dominion. Still a government may suffer loss
through the negligence of its officers. If it comes
down from its position of sovereignty and enters
the dominion of commerce, it submits itself to the
same laws that govern individuals there. Thus,
if it becomes the holder of a bill of exchange it
must use the same diligence to charge the drawers
and endorsers that is required of individuals, and
if it fails in this its claim upon the parties is lost.
Generally in respect to all the conrmercial business
of the government, if an officer "^Scially charged
with the performance of any duty and authorized
to represent the government in that behalf, neglects
that duty and loss ensues, the government must
bear the consequences of his neglect. But this
cannot happen until the officer specially charged
with the duty, if there be one, has acted or ought
to have acted. As the government can only act
through its officers, it may select for its work
whomsoever it will; but it must have some repre-
sentative authorized to act in all the emergencies
of its commercial transactions. If it fails in this,
it fails in the performance of its duties and must
be charged with the consequences that follow such
omissions in the commercial world."

Would it be seriously contended that if a pri-
vate corporation had deposited money in the de-

fendant bank to the credit of its agent, and author-
ized him to draw checks against the fund, that he
would not have the authority to draw a check to a
fictitious payee? As between himself and his
principal he might not, but as between the bank
and himself manifestly he would. The principal
that clothes its agent with the authority to so use
his power as to perpetrate fraud must bear the loss
if fraud be perpetrated, rather than the innocent
party; and if McCoy, at the time he issued the
checks intended to have the payees fictitious per-
sons, then it seems to us that the checks were made
payable to bearer and the bank was under no re-
sponsibility whatever in the premises.

Upon page 46 of brief of counsel for plaintiff is
cited Caha vs. United States (152 U. S., 211,) and
the case of Cosmos Company vs. Gray Eagle Iron
Company, (190 U. S., 301,) to the effect that the
regulation of any department of the government
has the force and effect of law.

The cases cited do not hold this, but hold that
the regulations are a part of the public records of
which the courts will take notice in the trial of
cases and that proof of such regulations will not be
required. We do not understand the decisions to

go to the extent of holding that these regulations
are the same in effect as a statute of the United
States.

But the formalities with which these checks
were issued were known to the government
and the checks were received by the government
at stated intervals during the time it was doing
business with the National Bank of Commerce and
no protest or objection was ever made as to the
particular requirements of the checks. If the
checks did not comply with the regulations the gov-
ernment should have objected; not having objected
we think it must follow that they were waived.

But the checks were drawn by McCoy, who
testified that he presented a letter from the Treas-
ury Department to the National Bank of Com-
merce authorizing the bank to honor his checks,
without conditions or limitations, and if any regu-
lations to the contrary were in force the special
letter of McCoy would have modified those regula-
tions. The government clothed McCoy with the
power to draw this money without any limitations,
and there was no proof offered that the bank ever
received any regulations. But even if the regula-
tions v/ere received, that would not alter the status

26 '

of the parties. The regulations construed as a
whole require that the checks should state the pur-
pose for which they were drawn, but this was never
insisted upon.

As Judge Hanford said in his opinion (Record,
p. Ill) :

"The obligation of this defendant was to re-
ceive, safely keep and disburse public money ac-
cording to law and regulations. The bank was not
required to exercise supervision over the disbursing
officers or to insure the government against em-
bezzlement or loss of funds by misappropriation or
for expending money for improper purposes. The
duty of the bank was to pay the checks that were
properly drawn by an authorized person, a person
authorized to draw them, and pay the money to
the payees or to the order of the payees named in
the check. The bank could not know and was not
required to know whether the payments were prop-
er payments. It had to know that the payments
were made as authorized by the checks. I think
you are loading this case up with unnecessary mat-
ter in endeavoring to prove that these payments
were fraudulent to the extent of being drawn for
services that were not rendered or supplies that
were not furnished. The bank did not have to in-
quire about them and was not in a position to know.
The bank was in a position to know that the payees
who presented the checks or got the money or in-
dorsed them were properly identified."

Now if the payee was a fictitious person then

it was the intention of McCoy, who drew the check,

that the bearer should receive the money.

Counsel refer to the Floyd Acceptances, 7 Wall.,
666. As we read that case it does not support the
contention of counsel. In that case the Secretary
of War accepted a bill of exchange, contrary to the
laws of the United States and for the accommoda-
tion of the drawer, no power being vested in the
Secretary of War to accept drafts for accommoda-
tion. The same case, however, recognizes the right
of the Secretary of War, or other officer of the
government, although there may not be a statute
specially authorizing it, to issue bills of exchange
in order to transfer money from one point in the
United States to another, or elsewhere. The power
to make such transfers is incident to the exercise of
other constitutional provisions, and if the officer
draws a bill of exchange within the scope of his
powers it then partakes of all of the incidents of
ordinary negotiable paper and the good faith of its
issuance cannot be inquired into. In that case the
court says:

"It is true that when once made, by a person
having authority to make it, in any given case, it
is not open to the same inquiries, in the hands of a
third party, that ordinary contracts are, as to the
justice, fairness and good faith which attended its
origin, or any of its subsequent transfers, but, in
reference to the authority of the officer who makes

28 - ■ ^

it, to bind the government, it is to be judged by
the same rule as other contracts.

The authority to issue bills of exchange not
being one expressly given by statute, can only arise
as an incident to the exercise of some other power.
When it becomes the duty of an officer to pay
money at a distant point, he may do so by a bill of
exchange, because that is the usual and appropriate
mode of doing it. So, when an officer or agent of
the government at a distance is entitled to money
here, the person holding the fund may pay his
drafts. And whenever, in conducting any of the
fiscal affairs of the government, the drawing of a
bill of exchange is the appropriate means of doing
that which the department or officer having the
matter in charge has the right to do, then he can
draw and bind the government in doing so. But
the obligation resting on him to perform that duty
and his right and authority to effect such an object
is always open to inquiry, and if they be found
wanting, or if they be forbidden by statute, then
the draft or acceptance is not binding upon the gov-
ernment."

Floyd Acceptances, 7 Wall., 666.

In this case it cannot be questioned that McCoy
was clothed by the government with the power to
draw checks in the conduct of his business, and the
Treasury Department furnished his signature to
the defendant bank and directed the bank to honor
his checks on the fund. He had the power to issue
checks in the transaction of his business and in the
ordinary way and his actions in drawing the checks

were recognized over a long period of years by the
government itself.

RECIPROCAL DUTIES BETWEEN BANK
AND DEPOSITOR.

But whether this court recognizes the au-
thority of McCoy to draw bills of exchange or
checks payable to fictitious payees or not, still the
action of the lower court in granting a non-suit
was clearly correct for other reasons. We have
insisted that the money was deposited to McCoy's
credit and that the relation of debtor and creditor
existed between McCoy as agent and the bank
and that McCoy had authority to check on it with-
out limitations or conditions, as he said in his
testimony. But for the sake of argument assume
that the money deposited to McCoy's credit at all
times belonged to the government. Then it must
follow that the relation of debtor and creditor
existed between the United States and the defend-
ant bank. And, as was said in the case of Cooke
V. United States, supra, when the government
enters into commercial transactions it abandons
its sovereignty and becomes bound by the ordinary

usages and customs of commercial business and
becomes bound by the rules regulating and con-
trolling reciprocal obligations existing between a
bank and its depositors. Among these obligations
is the duty of the bank to furnish periodical state-
ments of the condition of the account to the de-
positor. This is partly for the protection of the
depositor and partly for the protection of the
bank.

"It has long been the usage of banks to give
out passbooks to their customers, in which the
latter are credited with their proper deposits.
These passbooks are sent in as occasion may seem
to demand, often periodically and by request of the
bank as well as upon the volition of the depositors,
and are posted or statements returned with them
along with the paid checks or vouchers, showing
the condition of the depositor's account upon the
books of the bank. It matters little whether the
passbooks are sent in voluntarily or by request of
the bank to be posted — the purpose and effect of
the statements rendered by the bank in connection
therewith are the same. They not only afford
means whereby the depositor may discover errors
to his prejudice, but furnish evidence in his favor
in the event of dispute or litigation with the bank.
They serve to protect him against the carelessness
or fraud of the bank. The right thus accorded by
banks to frequent accountings in this manner, so
that the depositor may keep informed as to the
condition of his account, as it appears upon the
books of his depositary, is one of such manifest
advantage that it entails a correlative duty upon

the depositor. It requires of him an examination
of the account rendered, and, if errors or omis-
sions become apparent, it is then incumbent upon
him to bring them to the attention of the bank, by
returning his passbook for correction, or by other
convenient method. Otherwise his silence will be
regarded as an admission that the entries as shown
are correct."

National Bank of Commerce v. Tacoma Mill

Company, 182 Fed., 6.

"The depositor cannot, therefore, without in-
justice to the bank, omit all examination of his ac-
count when thus rendered at his request. His
failure to make it or have it made, within a rea-
sonable time after opportunity given for that pur-
pose, is inconsistent with the object for which he
obtains and uses a passbook."

Leather Manufacturers^ Bank v. Morgan,

117 U. S., 96.

In the Tacoma Mill Company case, supra, the
entire subject of the correlative duties between
bank and depositor is considered and the author-
ities reviewed, and the court says:

"It being the duty of the depositor to examine
the statements of his bank when periodically bal-
ancing his passbook, it must follow that he is
charged with knowledge of what those statements
contain, whether he makes the examination in per-
son or through an agent designated for the pur-

pose. Logically, also, he must know the state of
his own accounts, if regularly and honestly kept.
He is not bound to know what a dishonest clerk
may have inserted therein, contrary to the fact
and with a purpose of deceiving and defrauding
him, but he would be bound to know what the legiti-
mate facts or entries would disclose if followed
to their natural sequence in the exercise of ordi-
nary business care and alertness. That is to say,
if legitimate entries and the manner of their entry
in books of account or books of business memo-
randa would be suggestive of other facts, or would
lead to further inquiry before an ordinarily pru-
dent man, acting in business concerns, would be
satisfied, then the principal must know what the
inquiry would result in if the information at hand
were followed to its natural conclusion."

The doctrine of the above mentioned case is
in line with the principles of the leading decisions
of the United States Supreme Court and other
courts.

Now let us apply the foregoing principles of
law to the facts in this case. McCoy was the
agent of the government; he rendered to the gov-
ernment weekly, monthly and quarterly state-
ments; sent to the government forged pay-
rolls, forged vouchers and forged receipts
for a period of more than two years. His
duties were to examine in ithe field one-
tenth of the actual surveys of various town-

' • . 33

ships of the public domain and he was required
to and did send in to the government reports,
maps, drawings, and field notes of his work. The
slightest examination or inquiry on the part of
the government would have immediately disclosed
his fraudulent practices and would have prevented
a continuation of them, and would have rendered
it impossible for him to have succeeded in defraud-
ing either the government or the bank. He was
constantly in the city of Seattle and sent his re-
ports to the government as to his field work and of
his expenditures in doing the work from Seattle;
he sent in reports covering his field work in Wash-
ington, Montana and Idaho, giving the names and
post office addresses of the fictitious persons whom
he claimed to have employed. With the vast army
of secret service men employed by the gov-
ernment it would seem that it was the grossest
carelessness on the part of the government not to
have discovered, for considerably more than two
years, that McCoy's maps and field notes were
made up without his ever having gone upon the
ground himself. An inquiry addressed to any of
the local employes of the government in the land
department, the treasury department, or the legal

34 , .

department, would have enabled the government
to discover that his whole course of conduct was
saturated with fraud.

Moreover, the defendant bank paid the checks
drawn by McCoy upon his bank account, made out
in his handwriting and signed by his guaranteed
signature; paid them, however, through other
banks. His account with the bank was balanced
each month and a statement of the same furnished
to him, and a statement furnished to the Treas-
ury Department. Every three months all of the
vouchers drawn by him were forwarded by the
bank to the government and were retained by the
government, as well as the statements, without
question or protest. The government was charged
with the money that McCoy drew and acquiesced
in his method of doing business. No protest was
ever made by the government either as to the
form in which the checks were drawn or the fact
that in many instances they failed to state the
purpose for which they were drawn; and it was
at all times within the power of the government
to have discovered, by the exercise of even ordi-
nary diligence, his fraudulent practices.

Had the government exercised this ordinary

diligence promptly, then no damage would have
resulted, except as to the earlier fraudulent acts.
It was the duty of the government to exercise at
least ordinary diligence in investigating the acts
of its agent, and such investigation would unques-
tionably have led to the discovery of the fraud.

The government did not do this, and now
seeks to compel the bank, that acted in good faith
and v/ith due diligence, to save it harmless against
the loss brought about by its own negligence, and
which could not have happened had it been dili-
gent.

Moreover, the statutes of this state provide

that in case of forged checks, notice must be given

to the bank within sixty days after the return of

the vouchers to the depositor, otherwise no suit

can be brought for the recovery of money paid out

on forgeries. The statute is as follows:

"No bank or trust company shall be liable
to a depositor for the payment by said bank or
trust company of a forged or raised check, unless
within sixty days after the return to the depositor
of the voucher of such payment, such depositor
shall notify the bank or trust company that the
check so paid was raised or forged."

2 Rem. & Bal. Code, 3363.

It is contended by plaintiff's counsel that this
statute can have no application to the United
States, citing cases that hold that state statutes of
limitation have no application to the United States.
This statute is not in the nature of a statute of
limitations but is one that is simply a recognition
of the common law doctrine that a depositor must
promptly verify his statements of account or other-
wise his right of action shall cease. It does not
undertake to fix the time within which a suit may
be brought and is not a statute of limitations but
one that regulates the reciprocal duties between a
depositor and his bank. It is a reasonable pro-
vision and is one that is enforced against indi-
vidual depositors, and no reason appears to us
why it should not apply to the government. When
the government enters into the relation of de-
positor with a bank in any particular state the
statute becomes a part of the contract between the
depositor and the bank and is binding upon the
depositor, whether that depositor be the govern-
ment or an individual, to the same extent as though
it had been written into the contract.

Judge Hanford in ruling upon the demurrer
(Record, p. 17) clearly expressed the general rule of

• 37

law and while he held that the statute did not apply
did hold that the rule of law expressed in the statute
had substantially the same force without the stat-
ute. The following is his language:

"There may be good ground for holding that
the statutes that have been cited are not applicable
or controlling, but without any statute the rule
of honest, fair dealing between contracting par-
ties applicable to this case, is that bankers must
bear losses from paying bad checks. When a check
is presented for payment, the banker has a right
to know, to be assured before paying, that the per-
son demanding payment is the identical ^ person
entitled to receive the money. If a check is writ-
ten payable to a person, or supposed person, or to
his order, the bank is not obliged to pay that check
until the holder identifies himself as the payee, or
endorsee and offers satisfactory proof of the genu-
ineness of every endorsement thereon. That is a
natural right incidental to a banker's liability for
making a payment to a person having no right to
demand it. Now, tracing that same rule a little
further, where the bank has been deceived and has
paid a check which ought not to have been paid,
early information of the error is necessary to pre-
serve the right of recourse against whomsoever
may be primarily responsible for the error and
the depositor is the one best qualified to discover
errors, so that there is a presumption that he will,
upon inspection of checks that have been paid,_ dis-
cover a bad check if there is one, and he is obligat-
ed to be vigilant and prompt to report errors.
Therefore, where there is a running account be-
tween a depositor and a bank, and monthly state-
ments are made to the depositor, with a surrender

of his checks that the bank has paid, according to
the rule of honesty and fair dealing the depositor
becomes bound to look at the returns and report
any error promptly. The rule between individuals
having mutual running accounts is that an ac-
count stated becomes an account proved, if the
party to whom the statement is rendered fails to
show errors or mistakes in it within a reasonable
time. There is a good reason for this, which this
case demonstrates, for if the plaintiff had acted
with promptness in checking up the returns made
by the defendant, as pleaded in its answer, the
traiidulent practice would have been discovered
and stopped and all parties could have been pro-
tected. The failure of the government to examine
these returns and report errors in time, was a
cause of the successful practice, or continuance of
those frauds, and was necessarily detrimental to
the defendant. That failure on the part of the
government counterbalances any neglect to dis-
charge Its obligation on the part of the defendant
bank. There has been a loss suffered by reason of
mutual neglect by plaintiff and defendant. Now
who should bear that loss? I think that the com-
mon law rule, that where there is negligence and
contributory negligence the law will not concern
itselt with any controversy as to who should bear
the loss, but leaves the loss to rest where it falls
In this case that rule leaves the loss resting upon
the plaintiff. The court sustains the demurrer to
the tirst affirmative defense and overrules it as to
the second."

In the latter part of Judge Hanford's de-
cision he says that where both parties have been
negligent and a loss has occurred, the law will

not concern itself with any controversy as to who
should bear the loss, but leaves the loss to rest
where it falls. So it would seem that if both the
government and the bank were acting in good
faith and that the loss has resulted by their mu-
tual mistakes or mutual neglect, then the loss shall
remain where it has fallen.

Counsel seem to rely upon the case of United
State V. National Exchange Bank, 214 U. S., 302,
but the facts in that case are entirely different
from those in this case. In that case the United
States sought to recover payments made at the
United States Sub-Treasury at Boston upon 194
pension checks, the signatures or marks of the per-
sons to whom the checks were payable having been
forged. Upon receipt of pension vouchers regular
in form and purporting to be executed by the pen-
sioner named therein but which in fact were
forged, the United States Pension Agent at Boston
drew checks upon the Sub-Treasury at Boston, ag-
gregating $6,362.07 in favor of the pensioners
named in the vouchers and transmitted said checks
by mail direct to the address of each pensioner,
as given in the vouchers. The checks, with the
purported endorsements thereon of the payees,

40 ■ . '

were cashed by the Exchange Bank and immediate-
ly endorsed to a National Bank at Boston for col-
lection. The checks were presented by the collect-
ing bank at the Sub-Treasury of the United States
at Boston. The collecting bank received payment
for the same and accounted for the payment to
the Exchange Bank.

In this case the court held the United States
could recover and at the conclusion of the opinion
the court said:

"Under these conditions the warranty of genu-
ineness implied by the presentation and collection
of the checks bearing the forged endorsement hav-
ing been broken at the time the checks were cashed
by the United States and the cause of action hav-
mg therefore then accrued, the right to sue to re-
cover back from the Exchange Bank was not con-
ditioned upon either demand or the giving of no-
tice of the discovery of facts which, by the opera-
tion of the legal warranty, were presumably with-
m the knowledge of the defendant.

'The conclusion to which we have thus come
renders it unnecessary to consider whether, if the
facts presented merely a case of mutual mistake,
where neither party was in fault, and reasonable
diligence was required to give notice of the dis-
covery of the forgery, if there was lack of such
diligence it would operate to bar recovery by the
United States, although the Exchange Bank was
not prejudiced by the delay."

. In this case the defendant paid these checks
with fictitious endorsements, charged the amount

thereof to McCoy's account and promptly notified
the government of such charge. The government
received the accounts and vouchers and has pre-
sented them in this case. It was the duty of the
government to have made a demand upon the de-
fendant for the money and it has assumed this
burden by making and pleading the demand; but
it did not do so until six months after the dis-
covery of the forgeries. The evidence shows that
during all the months between the discovery of the
forgeries in September, 1909, and the demand upon
the bank on March 5th, 1910, the Bank of Com-
merce had rendered monthly statements of its
accounts to the various banks from whom it re-
ceived the checks in question for collection. It
might have recovered the money had the notice of
the forgeries been promptly given. Its recourse
against these forwarding banks from whom it re-
ceived the checks is now doubtful and the defend-
ant has sustained an injury, at least to the extent
of rendering it extremely doubtful as to its right
of recourse against the forwarding banks.

In the case of Exchange Bank v. United States,
151 Fed., 407, it is said:

"None of the cases made any exception of the

kind claimed by the United States in the case at
bar, namely, that the defending bank, in order to
meet the demand of the United States, is bound to
establish that it suffered detriment by the delay.
* * * Some of the cases in discussing the matter
differ as to the equities under circumstances like
those before us. Some hold that the loss should
be allowed to remain where it fell. However this
may be, any demand for prompt notice in cases of
forgeries is wholesome. When discovered, for-
geries should not be coddled, but should be made
known, both to the public prosecutor and to those
immediately concerned; and any attempted test
with reference to the question whether the party
from whom rcovery is sought has suffered by delay
is wholly unsatisfactory, because the determina-
tion whether one who has suffered by a forgery
may recoup himself is more a matter of chances
which cannot be estimated, than the result of
logical investigation of particular facts.

"Consequently, if this were a case of commer-
cial paper proper as known in the law of mer-
chants, and between individuals, it is established
that unreasonable delay in giving notice after the
discovery of the forgeries would have discharged
the Exchange Bank, without regard, ordinarily,
to any question whether it suffered damage there-
by. This, of course, is an exceptional rule, ap-
plicable to distinctly commercial paper, because
with regard to liability for money paid on a signa-
ture supposed to be genuine, but forged, or paid
under any other mistake, in ordinary transactions
It IS admittedly necessary that damage should have
ensued by reason of any alleged negligence in giv-
ing notice of the facts. In conclusion as to this
topic, the rule as we understand it is in entire har-
mony with the fundamental principles of that por-

tion of the commercial law which relates to giving
parties to commercial paper notices of defaults.
They insist upon promptness, but ordinarily re-
quire no proof, pro or con, on the question whether
damage resulted from delay."

When the government received the periodical
statements from the defendant bank and made no
objection or protest against the correctness of the
same for a period of more than two years, the pre-
sumption arose that the government had acquiesced
in these statements and the account as between
the government and the bank became a stated ac-
count and in order to evade the effect of this con-
dition the government by the testimony admits
that by the exercise of the slightest investigation
it could have discovered the forgeries and fraud
and could have protected itself and the bank. It
therefore admits its own negligence and yet seeks
to have the stated account set aside and seeks to
recover from the bank for a loss occasioned by its
own negligence. It repudiates the acts of its own
agent, ignores all of the equities in the case and
the rights of the defendant bank and seeks to take
advantage of its own wrong. It has continuously
refused to surrender the vouchers so that the de-
fendant bank might proceed against the other

banks to whom it paid the money on the checks;
it has acted in utter disregard of the rights of the
defendant and has thrown every obstacle in the
way to prevent the bank from recouping its losses
by proceedings against third parties. It admits
that it could have discovered the frauds, but did
not do so, and yet seeks to compel the bank, an
innocent party, to pay the loss sustained by the
government and acquiesced in for a period of more
than three years. It clothed McCoy with the power
to draw the checks upon the defendant and with
full knowledge of the drawing of such checks and
their payment by the bank, the government stood
by and exerted its utmost efforts to prevent the
bank from recovering the money from third par-
ties and has rendered it impossible for the bank
to successfully prosecute any action against third
parties for the recovery of the sums in controversy,
by withholding the checks. It has disregarded the
universal rule requiring a party who receives
forged instruments to immediately give notice of
the forgeries upon their discovery, and to return
the documents.

If ever a case existed where the rule of law
requiring the loss to remain where it falls should

be enforced, this is such a case. Even though for the
sake of argument it might be conceded that the
bank should not have paid out the money without
a more strict identification of the payees and was,
therefore, guilty of some negligence, still the laches,
and delays, and refusal to return the documents on
the part of the government rendered the govern-
ment guilty of contributory negligence and the
action of the lower court in granting the non-suit
was clearly justified by the record in the case and
by the law. The action of the lower court in
granting the motion for non-suit and in dismissing
the action was correct and should be affirmed.
Respectfully submitted,

JAMES A. KERR,
EVAN S. McCORD,
Attorneys for Defendant in Error.

No. 2193 ^

Qltrrmt (Enurt af KppmU

THE PACIFIC STATE BANK, a Corporation,

Appellant,

vs.

A. S. COATS, as Trustee in Bankruptcy of RAYMOND
BOX COMPANY, a Corporation, Bankrupt, et al.,

Appellees.

Mpon Appeal from t^t Inmb §>mts WxBtrxtt (Eourt for tl\t
WsBtmx itstrirt of llasl|tngton. Mfstfrtt ituistott.

FiL^fKR Bros. Co. Print, 330 Jackson St.. S. F., Cal.

FILED

IIQV 1 1 1912

No. 2193

Olirrmt Court of A;ip^als

3For tl|f Ntntli (Utrnttt

THE PACIFIC STATE BANK, a Corporation,

A ppellant,

vs.

A. S. COATS, as Trustee in Bankruptcy of RAYMOND
BOX COMPANY, a Corporation, Bankrupt, et al.,

Appellees.

Olrattarrijrt of IS^navh.

m Appeal from tlj0 Ittttrii BtaUz itatrtrt Olourt for tlj?
WtBUvn itatrUt of 5ila0t|tttJ5ton, Wtsttvn itotfitott.

FiLMER Bros. Co. Print, 330 Jackson St., S. F.. Cal.

INDEX OF PRINTED TRANSCRIPT OF
RBOORD.

rcierk'B Note: When deemed likely to be of an Important nature,
errors or doubtful matters appearing in the original certified record are
jXtd literally in italic; and. likewise, cancelled matter appearing ^
L original certified record is printed and cancelled herein accord-
wy men possible, an omission from the text is ^^^ «=^*«d ^^
Stag in itaUc the two words t.etween which the omission .eei^
TlfL Title heads inserted by the Clerk are enclosed within
brackets.} p^^^

Addenda to Memorandum Decision Re Mort-

101

gage

Affidavit of H. W. B. Hewen ^^

Affidavit of M. H. Leacli ^^

Amendment to Petition of the Pacific State

Bank ^'6

Answer of Creditors to Petition of the Pacific

State Bank 29

Assignment of Errors 108

Attorneys, Names and Addresses of 1

Bond on Appeal

Certificate of Clerk U. S. District Court to Rec-
ord, etc ' ^^^

Citation ^J^

Decree

EXHIBITS:

Exhibit "A" to Petition of Pacific State
Bank (Mortgage, Dated December 2,
1910— Raymond Box Co. to Pacific
State Bank) 1^

11 The Pacific State Bank

Index. Page

EXHIBITS— Continued :

Exhibit "A" to Eetum of Trustee (Affida-
vit of Samuel McMurran) 57

Exhibit "B" to Return of Trustee (Affidavit

of Miles Leach) 59

Exhibit "C" to Return of Trustee (Affida\dt

of Ralph Gerber) 60

Exhibit "D" to Return of Trustee (Affidavit

of W. S. Cram) 61

Exhibit "E" to Return of Trustee (Affidavit

of F. C. Schoemaker) 62

Exhibit ''F" to Return of Trustee (Affidavit

of A. S. Coats) 63

Exhibit '^G" to Return of Trustee (Affidavit

of R. V. Pearce) 64

Exhibit "H" to Return of Trustee (Affidavit

of T. H. Bell) 65

Exhibit No. 1 (Affidavit of Charles E. Miller
in Opposition to Motion to Amend Peti-
tion) 80

Exhibit No. 2 (Letter Dated May 8, 1911,
from J. A. Heath to ''Dear Friend

Alex.") 83

Findings of Fact and Conclusions of Law 69

Judgment 73

Memorandum Decision In Re Mortgage Owned

by the Pacific State Bank 92

Mortgage Dated December 2, 1910 — Raymond
Box Co. to Pacific State Bank (Recorded) . . 18

Motion to Amend Petition 75

Names and Addresses of Attorneys 1

vs. A. S, Coats. iii

Index. Page

Note, Dated December 2, 1911 16

Order Granting Pacific State Bank Leave to
Amend Petition, and Denying Offer of At-
torney for Trustee 79

Order Granting Petition on Appeal 110

Order Making Certain Additional Papers a Part

of the Record, etc 90

Order of Referee Denying Leave to Foreclose

Mortgage ^^

Order of Referee Granting Petition of Pacific
State Bank for Leave to Foreclose Mort-
gage in Proper Court Having Jurisdiction
Thereof, and to Make Trustee a Party, etc . . 85

Petition for Appeal • • •

Petition of the Pacific State Bank for Order Au-

thorizing Foreclosure Proceedings, etc. . . . ^

Proof of Claim of Pacific State Bank 25

Replication to Answer

Replication to Return of Trustee 67

Return of Trustee in Bankruptcy 46

Stipulation for Omission of Caption of all Papers. 1

Stipulation of Facts ^

Stipulation that Judge Hanford Shall Decide
Validity of Real Estate Claim, etc., on Rec-
ord Heretofore Made by Petition for Re-
view, etc ^°

Names and Addresses of Attorneys.

ELMER M. HAYDEN, Esquire, #408 Perkins
Building, Tacoma, Washington,

MAURICE A. LANGHORNE, Esquire, #408 Per-
kins Building, Tacoma, Washington,

H. W. B. HE WEN, Esquire, Attorney at Law, South
Bend, Washington,

Attorneys for the Pacific State Bank, Ap-
pellant.

CHARLES E. MILLER, Esquire, South Bend,
Washington,

Attorney for A. S. Coates, Trustee in Bank-
ruptcy of Raymond Box Co.

JOHN T. WELSH, Esquire, South Bend, Washing-
ton, and
MARTIN C. WELSH, Esquire, South Bend, Wash-
ington,

Attorneys for Pacific Transportation Co.,
and Others, Creditors of said Raymond
Box Company, Bankrupt.

Stipulation [for Omission of Caption of All Papers].

It is hereby stipulated that the caption of all in-
struments, other than that first prepared, may be
omitted in preparing the transcript on appeal herein,
and said transcript of the instruments without the
caption shall be with like efeect as though they were

2 The Pacific State Bank

shown properly captioned in the Court and Cause.
Dated September 25th, 1912.

CHAS. E. MILLER,

Attorney for Trustee.
WELSH & WELSH,
Attorneys for Certain Creditors.
H. W. B. HEWEN,
HAYDEN & LANOHORNE,
Attorneys for Pacific State Bank.

[Endorsed] : '* Filed U. S. District Court, Western
District of Washington. Sep. 28, 1912. Frank L.
Crosby, Clerk. By E. C. Ellington, Deputy. " [1*]

In the District Court of the United States, for the
Western District of Washington, Western Di-
vision.

IN BANKRUPTCY.— No. 1054.
In the Matter of the RAYMOND BOX COMPANY,

Bankrupt.
Petition of the Pacific State Bank [for Order Autho-
rizing Foreclosure Proceedings, etc.].
To the Hon. Judges of the Above-entitled Court, and
to the Hon. WARREN A. WORDEN, Referee
in Bankruptcy :
Comes now the Pacific State Bank, and respect-
fully petitions your Honors, and represents as fol-
lows, to wit:

I.
That at all of the times hereinafter mentioned your
petitioner was and now is a corporation, organized

^Page-number appearing at foot of page of original certified Eecord.

vs. A. 5. Coats. 3

and existing under and by virtue of the laws of the
State of Washington, aJid has paid its annual license
fee last due, and is entitled to wage suits and actions
at law or equity in the courts of the United States and
of the State of Washington.

II.
That at all the times hereinafter mentioned, the
Raymond Box Company, the bankrupt herein, was,
and now is a corporation, organized and existing
under and by virtue of the laws of the State of Wash-
ington, and has it principal [2] place of business
at Raymond, Pacific County, Washington, m the
Western District of such State, which said last-
named corporation was, on or about the day of

- 1912, adjudged bankrupt by this Court.

III.

That heretofore, and on or about the 2d day of De-
cember, 1910, the petitioner loaned to the bankrupt
the suiii of Twenty-three Thousand Four Hundred
($23,400) Dollars, and in consideration thereof the
bankrupt made, executed and delivered to petitioner
its certain promissory note of that date, in words,
figures and letters following, to wit:
' ' $23400 South Bend, Wash., December 2, 1910.

THREE MONTHS after date, without grace, for
value received, I, we or either of us, as principals,
promise to pay to the PACIFIC STATE BANK, or
order, at their bank in South Bend, Washington,
TWENTY THREE THOUSAND FOUR HUN-
DRED DOLLARS, in United States gold coin, with
interest thereon in like gold coin at the rate of eight

4 The Pacific State Bank

per cent, per annum from date until paid. Interest
payable at maturity quarterly, and if the interest is
not paid when due, then the principal and interest be-
comes immediately due and collectible at the option
of the holder of this note.

If this note is not paid when due, we agree to pay
all reasonable costs of collection, including attorney's
fees which the court may adjudge or deem to be rea-
sonable and proper, and also consent that judgment
may be entered for these amounts by any Justice of
the Peace of proper jurisdiction.

It is hereby expressly agreed and imderstood that
in the event of any suit or action being brought
against the maker, or makers of this note, dissolution
of partnership, retiring from or disposing of business,
[3] death, or any loss by fire the amount then re-
maining unpaid, together with interest, shall at once
become due and payable, and the owner hereof may
take immediate action hereon.

For value received, each and every person sign-
ing or endorsing this note, hereby waives present-
ment, demand protest and notice of non-payment
thereof, binds himself as principal, not as security,
and promises that if suit be brought to collect the
same, or any part thereof, and hereby waiving all the
provisions of the deficiency judgment law, and the
valuation and appraisement laws of the state of
Washington.

(Signed) RAYMOND BOX COMPANY,

By J. A. HEATH, Pres.

MILES H. LEACH, Sec."
[Corporate Seal]

vs. A. S. Coats, 5

IV.

That at the same time and place, to wit, South
Bend, Washington, December 2, 1910, to secure the
payment of said promissory note, the bankrupt made,
executed, acknowledged and delivered to the peti-
tioner its certain mortgage of that date, a copy of
which is attached hereto, marked Exhibit - A," which
exhibit your petitioner asks to be made a part hereof
in all respects as though said mortgage was set out
in full herein, which said mortgage was duly filed for
record in the office of the auditor of Pacific County,
Washington, being the county in which the property
covered thereby is situated, on the 8th day of De-
cember, 1910, and was recorded on said date in Book
30 of mortgage records of said county at page 31, and
said mortgage was also filed as a chattel mortgage in
the office of the auditor of Pacific County, Washing-
ton, on the same date as chattel mortgage, file No.

604. [4]

That said indebtedness has not been paid, nor has
any part thereof been paid, excepting only as follows :

^ Dec. 19, 1910 $ 400.00

Dec. 22, 1910 298.29

Dec. 28, 1910 350.00

Mar. 3, 1911 449.05

Nov. 29, 1911, interest to Oct. 1st,

1911 1038.11

and there is now due thereon the full sum of Twenty-
two Thousand, Three Hundred Fifty-one and 71/100
($22,351.71) Dollars, with interest from October 1st,
1911, at eight per cent per annum.

6 The Pacific State Bank

VI.

That as appears by the terms of said mortgage, the
property covered thereby consists of real and per-
sonal property, and constitutes a manufacturing
plant for the manufacture of boxes ; that there is a
large amount of machinery and equipment installed
in said plant, which machinery and equipment will
fast deteriorate unless said plant is properly oper-
ated and maintained; that since the institution of the
proceedings in bankruptcy herein, your petitioner
has been informed and alleges the fact to be that said
plant has for some months just prior to the institu-
tion of these proceedings been operated at a loss ; that
the box business requires considerable operating cap-
ital in the way of stock on hand for manufacture and
manufactured stock, and accounts receivable, and
without a large capital, in addition to the plant itself,
it is impracticable to operate a business of that na-
ture, except at a loss and except at serious handicap.
[5]

YII.

That the value of said property is not greater than
the amount of the claim of your petitioner against
said property; that unless said property is sold to
satisfy your petitioner's claim, the value thereof will
fast become less, and your petitioner will be unable
to realize therefrom sufficient to pay its claim, and
your petitioner further alleges that the interests if
the bankrupt estate, and of this petitioner and of all
the creditors of said bankrupt will be best subserved
and protected if an immediate sale of all the property
of the said bankrupt now in possession and under

vs. A. S. Coats. 7

the control of the trustee, or which may hereafter
come under his control, be had; that the costs and ex-
penses of keeping said property will be great, and
will rapidly acciunulate, and that unless immediate
sale of all of said property be had, the same will be
greatly reduced by reason of such expenses and of
the upkeep of the same.

VIII.
That your petitioner further alleges that said claim
is a first mortgage and prior lien upon said property
and all of it, prior to the claims of any other persons
whomsoever, excepting the taxes for 1^11; and your
petitioner further alleges that it has no other se-
curity for the moneys so due and owing to it by the
said bankrupt, and that the insurance companies
which have been heretofore carrying policies of in-
surance on the property mentioned and described m
Exhibit ''A" have, in part, cancelled the same, and
refused longer to carry insurance on said described

property.

Your petitioner further alleges in connection with
the foregoing that the policies of [6] insurance
covering said property provide that the fact of in-
solvency through bankruptcy proceedings, or the ap-
pointment of a receiver, shall be of itself a cancella-
tion of said policies, and the termination of the lia-
bility of the insurance companies thereunder.

IX.
That your petitioner further states that it files this
petition, for the purpose of having this Court
speedily act upon the matters and things herem con-
tained, to the end that said described property may be

^ The Pacific State Bank

sold before it deteriorates in value, and before a par-
tial or a total loss will be sustained by your petitioner,
and If a sale is ordered and made under this petition
your petitioner prays that the costs and expenses of
administering the bankrupt's estate be not charged
against the property upon which your petitioner has
a lien for the moneys so advanced to said bankrupt
by it. ^

WHERE-FORE your petitioner prays that an
order may be entered herein authorizing your peti-
tioner to bring proceedings of foreclosure in such
court as may have jurisdiction thereof, making such
parties as your petitioner may be advised should be
made parties thereto.

If the Court should be of the opinion that the mat-
ters hereinbefore referred to and set out should be
determined in this court, then your petitioner prays
that the amount of said claim may be forthwith de-
termined herein ; that upon such amount being deter-
mined, that such amount may be adjudged to be a
first and prior lien on all the property described in
said mortgage so hereinbefore referred to, to the ex-
clusion of all liens, if any, [7] against the same,
and that a reasonable attorney's fee to be fixed by
this Court be adjudged to your petitioner, in accord-
ance with fte terms and condition of said note and
mortgage, in addition to the amount due thereon as
principal and interest, and that this Court mav
forthwith order a sale of said property in such man-
ner and form as the Court may deem just, but that
said sale shall be without delay, excepting only to
give such notice as the law and practice of this Court

vs. A. S. Coats. 9

prescribes; that upon such sale, your petitioner may
be adjudged to have, and may have the right to bid the
amount so adjudged to be due it, and to turn in on
its bid to the extent of such claim, its said note, or
make credit upon said note for the amount of peti-
tioner's bid at such sale, and that the Court may
make such other and further orders in the premises
as may be just and equitable.

PACIFIC STATE BANK,

By J. G. HEIM, President,

Petitioner.
H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for Petitioner.

State of Washington,
County of Pierce,— ss.

J. G. Heim, being first duly sworn, deposes and
says under oath, that he is President of the petitioner
above named; that he has read the foregoing peti-
tion, knows the contents thereof, and that the said

is true, as he verily believes.

J. G. HEIM. [8]

Subscribed and sworn to before me this 18th day
of March, 1912.

[Seal] E. M. HAYDEN,

Notary Public in and for Said County and State, Re-
siding at Tacoma.

10 The Pacific State Bank

Exhibit *^A" [to Petition of Pacific State Bank].
[Mortgage, Dated December 2, 1910— Raymond Box
Co. to Pacific State Bank.]
THIS INDENTURE made this 2d day of Decem-
ber, 1910, between the Raymond Box Company, a
corporation, organized and existing under the laws of
the State of Washington, party of the jfirst part and
Paciiic State Bank, also a corporation organized and
existing under the laws of the State of Washington,
party of the second part ;

WITNESSETH: That the said party of the first
part for and in consideration of the sum of $23,400.00,
lawful money of the United States, in hand paid by
the party of the second part, the receipt whereof is
hereby acknowledged, does by these presents grant,
bargain, sell and convey unto the party of the second
part, and to its successors and assigns, the following
real and personal property, privileges and fran-
chises, particularly described as follows, to wit:

Block B of the First Addition to Raymond, Pacific
County, Washington, according to the plat thereof on
record in the ofiice of said county, together with all
buildings and structures situated thereon.

Also a tract described as follows: Beginning at a
point on bank of slough South 19° 06' East 67.2
feet distant from the Southwest corner of 7th Street
and Heath Street, Avenue, of the First Addition to
the Town of Raymond, as the same has been platted
by John Henry, surveyor; thence North 74° 22' East
130.8 feet; thence South 89° 19' East 79.4 feet; [9]
thence North 55° 5T East 56.1 feet; thence North 43°

vs. A. S. Coats. 11

54' East 61.5 feet; thence North 83° 54' East 76.7
feet; thence South 60° 17' East ^^.^ feet; thence
South 18° 0' East 131.2 feet; thence South 62 22
Lt 58.4 feet; thence South 26° 19' West 113.3 feet;
thence North 50° 32' West 104.3 feet; thence 17 55
West 117.6 feet; thence North 41° 46' West 34 feet;
thence North 82° 12' West 34.5 feet; thence South
U U' West 105.32 feet; thence South 88° 27' West
123 feet; thence South 90° 55' East 56.4 feet; thence
^oiith 49° 44' West 22.3 feet; thence South 2.6 Di
t^!Z feet; thence North 19° 06' West 122.8 feet
to the place of heginning.

Also the grantor's right to use the channel or cut

"^iJ^ig at a point 141.1 feet South and 571.7
feetlst of the Southwest corner of ^ Street and
Heath Street Avenue; of the First f d^ion to the
Town of Raymond, as the same ^- been plat ed by
John Henry, surveyor; thence North 57 18 East
165.5 feet ; thence North 51° 37' East 69^ feet; thence
North 31° ir East 108.2 feet; thence North 22 15
East 70.9 feet; thence South 72° 4' East 121.4 feet;
thence South 26° 51' West 82 feet across slough;
thence North 60° 16' West 62.9 feet to bank of
nieander slough; thence South 89° 27' West 61.4 feet^
thence South 29° 45' West 83.9 feet; the-eSouth
97° 0' West 199.7 feet; thence South 60 10 West
144.7 feet; thence North 26° 19' West 113.3 feet to

place of beginning.

Also the following machinery situated m the mill
in said Block B: 1 Atlas Boiler 18' x 72"^ Flue; 1
Atlas Twin Engine: Cylinder 11" x 16"; 1 Umon

^^ The Pacific State Bank

Machine Co. Drag Saw, Machine 48 stroke; 1 Log
Jack; 1 Log carriage and feed works for same; 1
canting geer; 1 Crane for lifting blocks; [10] ' 1
Power bolter; with 70^ inserted tooth saw; 1 Large
Columbia Box Board Machine 52^' saw; 1 Wood's
Double Surfacer; 1 Frank Machinery 'co. Pony
Planer; 3 rip-saw tables; two with adjustable saws
and automatic feed; 1 double automatic feed cut-off
saw; 1 Hall & Brown 3&" Circular Resaw; 1 Swing
Cut-off with feet lever, friction feed; 1 Box Board
Printer; 1 outfit for filing and grinding circular and
band-saws, including to grinding machines; two tie-
ing machines, Lamb Manufacture; 1 Planer knife,
grinder; 1 complete dust collection system. All con-
veyers; all piping for dry kiln; 40 dry kiln trucks;
1 transfer truck; all railroad tracks; 1 Berlin Band
Resaw machine, including saws; 1 Morgan tongue
and Groove Box Board matcher; all belts, shafting,
and Transmission machinery, together with all fix-
tures and implements, real or personal property used
in the operation of the plant of the Raymond Box
Company, at Raymond, Washington, on said Block
B and slough adjoining thereto. Also contract for
water privileges of mill with Raymond Water Co.

Also the safe, desk, tables, stove, letter-press and
all office furniture of the first part, situated on said
premises, together with all and singular the tene-
ments, hereditaments, appurtenances and privileges
thereunto belonging.

It is also agreed that the first party shall keep the
building and machinery insured in such standard
fire insurance company as the party of the second

vs. A. S. Coats. 13

part may designate during the life of this mortgage
in the sum of not less than $11,000.00, with loss, if
any, payable to the mortgagor, as its interest may
appear.

In the event that the mortgagor fails to procure
said insurance and deliver the policy therefor to the
second party, [11] the second party shall have
the right to take out said insurance, and the premium
cost thereof shall be deemed secured by this mort-
gage and included therein.

This agreement is intended as a mortgage to secure
the payment of $23,400.00, lawful money of the
United States, together with interest thereon at the
rate of 8 per cent per annum, payable at maturity,
at the banking-house of the second party in South
Bend, Washington, and according to the terms and
conditions of one (payable in three months) promis-
sory note, bearing even date herewith, made by the
Eaymond Box Co., and payable to the order of the
Pacific State Bank; and these presents shall be void
if such payments be made according to the terms and
conditions thereof, but in case default is made in the
payment of principal or interest of said promissory
note, or any portion thereof as the same may become
due and payable according to the terms and condi-
tions thereof, or for breach of any of the covenants
of this mortgage, then the party of the second part,
its successors and assigns, are hereby empowered to
sell the said property in the manner prescribed by
law% and out of the money arising from said sale to
retain the whole of said principal and interest,
whether the same shall be then due or not, together

14 TJie Pacific State Bank

with the costs and charges of making such sale, and
the overplus, if any there be, shall be paid by the
party making such sale, on demand, to the said party
of the first part, its successors or assigns. And in
any suit or other proceeding that may be had for the
recovery of said principal sum and interest, on either
said note or this mortgage, it shall and may be lawful
for the said party of the second part, its successors
and assigns to include in the judgment that may be
recovered, counsel fees and charges of attorneys and
counsel [12] employed in such suit, as well as all
pa}Tnents that the said party of the second part, its
successors and assigns, may be obliged to make for
its security by insurance or on account of any taxes,
charges, incumbrances or assessments whatsoever on
the said premises or any part thereof.

The party of the first part hereby warrants the
title to the property above mortgaged and represents
that the same are free and clear of incumbrances.

In witness whereof, the said party of the first part
has hereunto affixed its corporate seal and these
presents to be affected by its President and Secre-
tary with the authority of the Board of Trustees.
RAYMOND BOX COMPANY.
By J. A. HEATH,
President.
Attest: MILES H. LEACH,
Secretary.
[Seal of Corporation.] [13]

vs. A. S. Coats. 15

State of Washington,
County of Pacific,— ss.

Be it remembered that on this 2d day of December,
1910, before me, the undersigned, a notary public in
and for the State of Washington personally appeared
the within named J. A. Heath and Miles H. Leach,
each to me well known to be the identical persons
above named and whose names are subscribed to the
within and foregoing instrument, the said J. A.
Heath as president and the said Miles H. Leach, as
secretary of said corporation, and the said J. A,
Heath acknowledged to me then and there that he as
president of said corporation had afiaxed said name,
together with his own name, freely and voluntarily
as his free act and deed and the free act and deed of
said corporation; and the said Miles H. Leach also
then and there acknowledged to me that he is secre-
tary of said corporation, had signed the above instru-
ment as secretary of said corporation by his free and

voluntary act and deed, and the free and voluntaiy

act and deed for said corporation.
Witness my hand and official seal.
[Notarial Seal] H. W. B. HEWEN,

Notary Public, Residing at South Bend, Washmgton.

[14]

AFFIDAVIT.

State of Washington,
County of Pacific,— ss.

We, J. A. Heath and Miles Leach, President and
Secretarv respectively of the Raymond Box Com-
pany, a "corporation, the above-named mortgagor,

16 The Pacific State Bank

after being duly sworn on oath, say that the fore-
going mortgage is made in good faith and without
any desire to hinder, delay or defraud creditors.

J. A. HEATH.

MILES H. LEACH.

Sworn to and subscribed before me this 2d day of
December, 1910.

[Notarial Seal] H. W. B. HEWEN,

Notary Public, Residing at South Bend, Washington.

[Endorsed:] "Piled this 18th day of March, 1912,
at 2:00 P. M. Warren A. Worden, Referee in Bank-
ruptcy." [15]

[Note, Dated December 2, 1911.]

$23400. South Bend, Wash., December 2, 1911.

Three months after date, without grace, for value
received, I, we, or either of us as principals, promise
to pay to the PACIFIC STATE BANK or order,
at their Bank in South Bend, Wash., TWENTY-
THREE THOUSAND FOUR HUNDRED DOL-
LARS in United States Gold Coin, with interest
thereon in like Gold Coin at the rate of EIGHT per
cent, per annum from DATE until paid, interest paj^-
able AT MATURITY, QUARTERLY, and if the
interest is not paid when due, then the principal and
interest becomes immediately due and collectible,
at the option of the holder of this note.

If this note is not paid when due WE agree to pay
all reasonable costs of collection, including attor-
neys' fees which the Court may adjudge or deem to
be reasonable and proper, and also consent that judg-

vs. A. S. Coats. . 17

ment may be entered for these amounts by any
Justice of the Peace of proper jurisdiction.

It is hereby expressly agreed and understood that
in the event of any suit or action being brought
against the maker or makers of this note, dissolution
of partnership, retiring from or disposing of busi-
ness, death, or any loss by fire, the amount then re-
maining unpaid, together with interest, shall at once
become due and payable, and the owner hereof may
take immediate action hereon.

For value received each and every person signing
or endorsing this note, hereby waives presentment,
demand, protest and notice of nonpayment thereof,
binds himself thereon as principal— not as security—
and promises that if suit be brought to collect same
or any part thereof, and hereby waiving all the pro-
visions of the deficiency judgment law, and the
valuation and appraisement laws of the State of

Washington. [1^1

^ RAYMOND BOX CO.

By J. A. HEATH, Pres.
MILES H. LEACH, Sec.
[Raymond Box Company Seal]
(#7?3)
[Endorsed] :

12^19-10. Pd. on within $400.00.
12-12-10. " " " 298.29.
12^28-10. " " " 350.00.
Mar. 3, 1911 Int. Paid to 3-2-ll-$449 . 05.

Mar. 2-11. Balance due $22,351.71.
11-29^11. Int. to 10-1-11-$1038 . 11.
[17]

18 TJie Pacific State Bank

[Mortgage, Dated December 2, 1910— Raymond Box
Co. to Pacific State Bank (Recorded).]
THIS INDENTURE made this 2d day of Decem-
ber, 1910, between the Raymond Box Company, a
corporation, organized and existing under the laws
of the State of Washington, party of the first part
and Pacific State Bank, also a corporation organized
and existing under the laws of the State of Washing-
ton, party of the second part:

WITNESSETH: That the said party of the first
part for and in consideration of the sum of $23,400,
lawful money of the United States, in hand paid by
the party of the second part, the receipt whereof is
hereby acknowledged, does by these presents grant,
bargain, sell and convey unto the party of the sec-
ond part and to its successors and assigns, the follow-
ing real and personal property, privileges and fran-
chises, particularly described as follows, to wit:

Block B of the First Addition to Raymond, Pa-
cific County, Washington, according to the ' plat
thereof on record in the office of said county, together
with all buildings and structures situated thereon.

Also a tract described as follows: Beginning at a
point on bank of slough South 19-° 06' East 67.2 feet
distant from the Southwest corner of 7th Street and
Heath Street Avenue of the First Addition to the
Town of Raymond, as the same has been platted bv
John Henry, Surveyor; thence North 74° 22' East
130.8 feet; thence South 89° 19^ East 79.4 feet;
thence North 55° 57' East 56.1 feet; thence North
43° 54' East 61.5 feet; thence North 83° 54' East
76.7 feet; thence South 60° 17' East 99.7 feet; thence

vs. A. S. Coats. 19

South 18° 0' East 131.2 feet; thence South 62° 22'
East 58.4 feet; thence South 26° W West 113.3 feet;
thence North 50° 32' West 104.3 feet; thence North
17° 55' West 117.6 feet; thence North 41° 40' West
34 feet; thence North 82° 12' West 34.5 feet; thence
iSouth 44° 14' West 105.32 feet; thence South 88° 27'
West 123 feet; thence South 80° 55' East 56.4 feet;
thence South 49° 44' West 22.3 feet; thence [18]
South 23° 51' East 39.6 feet; thence North 19° 06'
West 122.8 feet to the place of beginning.

Also the grantor's right to use the channel or cut
off slough beginning at a point 141.1 feet South and
571.7 feet East of the Southwest corner of 7th Street
and Heath Street Avenue; of the First Addition to
the Town of Raymond, as the same has been platted
by John Henry, surveyor; thence North 57° 18' East
165.5 feet; thence North 51° 37' East 69.4 feet;
thence North 31° 11' East 108.2 feet; thence North
22° 15' East 70 . 9 feet ; thence South 72° 4' East 121 . 4
feet; thence South 26° 51' West 82 feet across slough;
thence North 60° 16' West 62.9 feet to bank of
meander slough ; thence South 89° 27' West 61 . 4 feet ;
thence South 29° 45' West 83.9 feet; thence South
57° 0' West 199.7 feet; thence South 60° 10' West
144.7 feet; thence North 26° 19' West 113.3 feet to
place of beginning.

Also the following machinery situated in the mill
in said Block B: 1 Atlas Boiler 18' x 72"-4" Flue; 1
Atlas Twin Engine; Cylinder 11" x 16"; 1 Union Ma-
chine Co. Drag-saw, Machine 4S stroke; 1 Log Jack;
1 Log carriage and feed works for same; 1 canting
geer; 1 crane for lifting block; 1 Power bolter; with

20 TJie Paci^c State Bank

7(y' inserted tooth saw; 1 Large Columbia Box Board
Machine 52'' saw; 1 Woods Double Surfacer; 1 Frank
Machinery Co. Pony Planer; 3 rip-saw tables; two
with adjustable saws and automatic feed; 1 double
automatic feed cut off saw; 1 Hall & Brown 36" Cir-
cular Resaw; 1 Swing Cit-off with foot lever, friction
feed; 1 Box Board Printer; 1 outfit for filing and
grinding circular and band-saws including two grind-
ing machines, two tieing machines, Lamb Manufac-
ture; 1 Planer knife, grinder, 1 Complete dust col-
lecting system. All conveyors; all piping for dry
kiln; 40 dry kiln trucks; 1 transfer truck; all railroad
tracks; 1 Berlin Band resaw machine, including
saws; [19] 1 Morgan Tongue and Groove Box
Board and matcher; all belts, shafting, and transmis-
sion machinery, together with all fixtures and imple-
ments, real or personal property used in the operat-
ing of the plant of the Raymond Box Company, at
Raymond, Washington, on said Block B and slough
adjoining thereto.

Also contract for water privileges of mill with
Raymond Water Co.

Also the safe, desk, tables, stove, letter-press and
all ofBce furniture of the first party situated on said
premises, together with all and singular the tene-
ments, hereditaments, appurtenances and privileges
thereunto belonging.

It is also agreed that the first party shall keep the
buildings and machinery insured in such standard
fire insurance company as the party of the second
part may designate during the life of this mortgage
in the sum of not less than $11,000, with loss, if any,

vs. A. S. Coats. 21

payable to the mortgagor, as its interest may appear.
In the event that the mortgagor fails to procure
said insurance and deliver the policy therefor to the
second party, the second party shall have the right to
take out said insurance; and the premium cost
thereof shall be deemed secured by this mortgage and
included therein.

This agreement is intended as a mortgage to se-
cure the payment of $23,400, lawful money of the
United States, together with interest thereon at the
rate of 8 per cent per annum, payable at maturity, at
the banking-house of the second party in South Bend,
Washington, and according to the terms and condi-
tions of one (payable in three months), promissory
note, bearing even date herewith, made by the Ray-
mond Box Company and payable to the order of the
Pacific State Bank; and these presents shall be void
if such payments be made according to the terms and
conditions thereof, but in case [20] default is
made in the payment of principal or interest of said
promissory note, or any portion thereof as the same
may become due and payable according to the terms
and conditions thereof, or for breach of any of the
covenants of this mortgage, then the party of the
second part, its successors and assigns, are hereby
empowered to sell the said property in the manner
prescribed by law, and out of the money arising from
said sale to retain the whole of said principal and
interest, whether the same shall be then due or not,
together with the costs and charges of making such
sale, and the overplus, if any there be, shall be paid
by the party making such sale, on demand to the

22 .The Pacific State Bank

said party of the first part, its successors or assigns.
And in any suit or other proceeding that may be had
for the recovery of said principal sum and interest,
or either said note or this mortgage, it shall and may
be lawful for the said party of the second part, its
successors and assigns, to include in the judgment
that may be recovered, counsel fees and charges of
attorneys and counsel employed in such suit, a rea-
sonable sum, which shall be taxed as part of the costs
of such suit, as well as all pajTnents that the said
IDarty of the second part, its successors and assigns,
may be obliged to make for its security by insurance
or on account of any taxes, charges, incumbrances or
assessments whatsoever on the said premises or any
part thereof.

The party of the first part hereby warrants the title
to the property above mortgaged and represents that
the same are free and clear of incumbrances.

In witness whereof, the said party of the first part
has hereunto affixed its corporate seal and these pres-
ents to be affected by its President and Secretar}^
with the authority of the Board of Trustees. [21]
RAYMOND BOX COMPANY.
By J. A. HEATH,

President.
Attest: MILES H. LEACH,

Secretary.
[Corporate Seal of Raj^nond Box Company.]

State of Washington,
County of Pacific,— ss.

Be it remembered that on this 2d day of December,
1910, before me, the undersigned, a notary public in

vs. A. S. Coats. 23

and for the State of Washington, personally ap-
peared the within named J. A. Heath and Miles H.
Leach, each to me well known to be the identical per-
sons above named and whose names are subscribed
to the within and foregoing instrument, the said J.
A. Heath, as president, and the said Miles H. Leach,
as secretary of said corporation, and the said J. A.
Heath acknowledged to me then and there that he as
president of said corporation had af&xed said name
together with his ovm name, freely and voluntarily
as his free act and deed and the free act and deed of
said corporation; and the said Miles H. Leach also
then and there acknowledged to me that he as secre-
tary of said corporation had signed the above instru-
ment as secretary of said corporation by his free and
voluntary act and deed and the free and voluntary act
and deed of the said corporation. Witness my hand
and official seal.

[Notarial Seal] H. W. B. HEWEN,

Notary Public Eesiding at South Biend, Washing-
ton.

AFFIDAVIT.

State of Washington,
County of Pacific,— ss.

We, J. A. Heath and Miles H. Leach, president and
[22] secretary respectively of the Raymond Box
Company, a corporation, the above-named mortgagor,
after being duly sworn on oath, say that the fore-
going mortgage is made in good faith and without
any desire to hinder, delay or fraud creditors.

J. A. HEATH.

MILES H. LEACH.

24 The Pacific State Bank

Sworn to and subscribed before me this 2d day of
December, 1910.

[Notarial Seal] H. W. B. HEWEN,

Notary Public Residing at South Bend, Washing-
ton.

[Endorsed] : 12,640. 604 Raymond Box Com-
pany to Pacific State Bank.

State of Washington,
County of Pacific,— ss.

Received for record this 8th day of December, 1910,
at 1:15 o'clock P. M., and recorded at request of
Pacific State Bank in Book 30 of Mortgage Records
of Pacific County, Wash., on page 31.
Witness my hand and official seal.

E. A. SEABORG,
County Auditor.
State of Washington,
County of Pacific,— ss.

I, Oren C. Wilson, County Auditor of Pacific
County, Washington, do hereby certify that the
above, foregoing and attached, consisting of 5 sheets,
is a full, true and correct copy of an instrument here-
tofore filed in my office as a Chattel Mortgage, and
[23] also filed and recorded in my office as a real
estate mortgage.

In Testimony Whereof, I have hereunto set my
hand and affixed the official seal of my office this
twenty-third of March, nineteen twelve.
• [^eal] OREN C. WILSON,

County Auditor.

vs. A. S. Coats. 25

[Endorsed] : ''Filed U. S. District Court, Western
District of Washington. Jul. 26, 1912. A. W.
Engle, Clerk. R. W. Jamieson, Deputy." [24]

[Proof of Claim of Pacific State Bank.]
IN BANKRUPTCY.

At South Bend, Pacific County, Washington, in
the said District of Washington, on the 23d day of
July 1912, came L. W. Homan of South Bend afore-
said,'in the county of Pacific, in the said District of
Washington, and made oath, and says that he is
cashier of the Pacific State Bank, a corporation or-
ganized and existing under the laws of the State of
Washington, engaged in the business of banking at
South Bend, aforesaid, and that he makes this proof
of claim for and in said bank's behalf, and by author-
ity of said bank, and that Raymond Box Company,
a corporation, against whom a petition for adjudica-
tion of bankruptcy has been filed, and adjudication
entered, was at and before the filing of said petition,
and still is, justly and truly indebted to said Pacific
State Bank in the sum of Twenty-three Thousand
seventeen and 29/lOOths ($23,017.29) Dollars; that
the consideration of said debt is money loaned by
said bank to the defendant; that no part of said debt
has been paid, and that there are no setoffs or coun-
terclaims to the same. That attached hereto is the
original note and copy of mortgage given by said
Raymond Biox Company to said bank to secure said
claim, which note shows all endorsements and pay-
ments thereon; that the only securities held by this

26 .The Pacific State Bank

deponent for said debt are the real estate and chattel

mortgage, a copy of which is hereto attached, and that

the original instrument is now on tile with and in the

custody of the County Auditor for Pacific County,

Washington, pursuant to the laws of the State of

Washington.

That $3,000.00 is a reasonable attorney's fee to be
allowed claimant for collection of this note as pro-
vided therein.

L. W. HOMAN,

Subscribed and sworn to before me this 23d day of
July, 1912.

[Seal] H. W. B. HEWEN,

Notary Public in and for the State of Washington,
Residing at South Bend, Said State. [25]

COPY OP NOTE.

$23,400.00 South Bend, Wash, December 2, 1910.

THREE MONTHS after date, without grace, for
value received, I, we, or either of us as principals,
promise to pay to the PACIFIC STATE BANK
or order, at their Banlv in South Bend, Wash.
TWENTY-THREE THOUSAND & FOUR HUN-
DRED DOLLARS in United States Gold Coin, with
interest thereon in like Gold Coin at the rate of
EIGHT per cent per ANNUM from DATE unti]
paid, interest payable AT MATURITY, QUAR-
TERLY and if the interest is not paid when due, then
the principal and interest becomes immediately due
and collectible, at the option of the holder of this note.

If this note is not paid when due we agree to pay
all reasonable costs of collection, including attorney's

vs. A. S. Coats. 27

fees whieli the Court may adjudge or deem to be rea-
sonable and proper, and also consent that judgment
may be entered for these amounts by any Justice of
the Peace of proper jurisdiction.

For value received each and everj^ person signing
or endorsing this note, hereby waives presentment,
demand, protest and notice of non-payment thereof,
binds himself thereon as principal— not as security —
and promises that if suit be brought to collect same
or any part thereof, and hereby waiving all the pro-
visions of the deficiency judgment law, and the valua-
tion and appraisement laws of the State of Washing-
ton.

RAYMOND BOX CO.

By J. A. HEATH, Pres. [26]
^773. MILES H. LEACH, Sec.

[Endorsed] :

12-19-10. Pd on within $400.00.
12-22-10. " '' '' 298.29.
12-28-10. " " '' 350.00.
Mar. 3-11. Int. pd. to 3-2^11-$449.05.

Mar. 2-11. Bal. Due 22,351.71.
11-29-11. Int. to 10-1-11-1038.11.

28 The Pacific State Bank

[Endorsed] : ''Filed U. S. District Court, Western
District of AVasMngton. Jul. 26, 1912. A. W.
Engle, Clerk. R. W. Jamieson, Deputy." [27]

Stipulation [That Judge Hanf ord shall Decide Valid-
ity of Real Estate Mortgage Claim, etc., on
Record Heretofore Made by Petition for Review,
etc.].

It is hereby stipulated between A. S. Coats, the

Trustee in the above-entitled matter, and the Pacific

State Bank, Claimant, by their respective attorneys,

that the Honorable C. H. Hanford shall decide the

validity of the real estate mortgage claim of the

Pacific State Bank against the bankrupt herein, and

the validity of the chattel mortgage, claimed by the

Pacific State Bank, to be held by it on the property

of the said bankrupt, upon the record heretofore

made by the Petition for Review of the order of the

Referee in Bankruptcy filed herein, allowing the

Pacific State Bank to foreclose its mortgage, and that

said record and all of it be considered as properly

taken before the said judge for such purpose, without

further certification.

Provided that any such decision, affecting the
validity and preference of said real estate mortgage
and chattel mortgage, or either, sh^ll be subject to the
right of appeal by either party, and that the mere
fact that such decision is made out of its order and
in advance of the usual procedure in the allowance of
claims, that the same shall not affect such right of
appeal and the right of appeal by either party as to

vs. A. S. Coats. 29

the questions now decided, shall begin to run only
from the time of the final allowance of such claim,
if the Court shall decide the same to be a preference
and such real estate and chattel mortgage legal and
valid as against the creditors, it being the intention of
both parties by this stipulation simply to save time
and further certification, hearing and review, and
that the usual rights of appeal shall be in no way

affected.

And provided, further, that any decision now made
as to the validity of said real estate mortgage and
chattel mortgage shall not in any way be regarded as
res judicata should the said claimant be [28] per-
mitted to enter the State courts to foreclose its said

mortgage.
Signed and dated this 22d day of July, 1912.
CHAS. E. MILLER,

Attorney for Trustee.
H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for Pac. State Bank.

[Endorsed] : "Filed United States District Court,
Western District of Washington. Jul. 25, 1912. A.
W. Engle, Clerk. R. W. Jamieson, Deputy." [29]

Answer of Creditors to Petition of the Pacific State

Bank.

Comes now the following named creditors, namely,
Pacific Transportation Company, Raymond Trans-
fer & Cold Storage Company, Cram Lumber Com-
pany, Rajonond Foundry & Machine Company, Bell

30 The Pacific State Bank

Brothers Hardware Company, Siler Mill Company,
Willapa Lumber Company, W. W. Wood Company,
Pierce Brothers, J. E. Gardner, Standard Tow Boat
Company, Case Shingle & Lmnber Company, Quin-
ault Lmnber Company, Lebam Mill & Timber Com-
pany, Fern Creek Lumber Company, Gus Bacop-
olus, Mike Daniel, Victor Agren, Wm. A. Clark, Jim
Hamalas, Gus Pansgas, Abe Taylor, P. H. Hesmer,
L. E. Owens, Miles H. Leach, John Chepas, E. M.
Hatch, Chas. Herman, Ethel Owens, J. A. Schultz,
R. N. Skinner, Strat Nelson, Joseph Hatch, H. P.'
Klimmer, L. H. Osborne, Jim Jamison, E. Norwick,
Prank Walan, James Argeris, Arthur Bailey, Prank
Sholes, Ben Vanderflow and Ed Leacock, and answer-
ing the petition of the Pacific State Bank filed in the
above-entitled matter, admit, allege, and deny as fol-
lows:

Said answering creditors admit paragraphs num-
ber one, two and three of said petition.

Answering paragraph number four of said peti-
tion these answering creditors deny each and every
allegation contained in paragraph four of said peti-
tion, and the whole thereof, excepting they admit that
said bankrupt made and delivered to petitioner on or
about December 2d, 1910, an instrument a copy of
which is attached to petitioner's petition, and marked
Exhibit "A," and that the said instrument was re-
corded at the times and places stated in said para-
graph, but answering creditors deny that said instru-

vs. A. S. Coats. 31

ment was [30] ever recorded as a chattel mort-
gage or in any chattel mortgage record.

III.
These answering creditors, answering paragraph
niunber five of said petition, allege that they have no
knowledge or information sufQcient to form a belief
as to the truth or falsity of any of the allegations
contained in said paragraph, and therefore on then-
information and belief they deny the same, and put
the said petitioner upon its proof.

IV.

These ans^vering creditors deny each and every
allegation contained in paragraph six of said peti-
tion, excepting they admit that in said Exhibit ''A"
that the property covered thereby consists of real and
personal property, and that the same constitutes a
manufacturing plant for the manufacture of boxes,
and that in said plant there is a large amount of ma-
chinery and equipment installed therein.

V.
These answering creditors deny each and every
allegation contained in paragraph number seven of
said petition and the whole thereof.

VI.
Said answering creditors deny that petitioner's
claim is a first mortgage and prior lien upon said
property, or any part of said property, or that the
same is a lien whatever on said property, or that the
same is a lien at all in so far as these answering cred-
itors are concerned. These answering creditors deny
that petitioner has a first mortgage and prior lien, or

32 The Pacific State Bank

that it has any lien prior to the claims of these
answering creditors or any of them. These answer-
ing creditors deny that the said instrument is a lien,
[31] whatever, upon the property of said bankrupt,
prior to the claims of any of these answering cred-
itors.

VII.
These answering creditors, answering paragraph
number nine of said petition, deny each and every
allegation contained in said paragraph number nine
and the whole thereof.

For a further separate answer and defense unto
petitioner's petition, these answering creditors aver
as follows:

I.
That the Pacific Transportation Company is now
and was at all of the times hereinafter in this an-
swer mentioned a corporation duly organized and ex-
isting under and by virtue of the laws of the State of
Washington, and that it has paid its annual license
fee last due to the State of Washington, and is en-
titled to defend suits or actions at law or equity in
the courts of the United States and in the State of
Washington.

That the Cram Lumber Company is now and was
at all of the times hereinafter in this answer men-
tioned a corporation duly organized and existing
under and by virtue of the laws of the State of Wash-
ington, and that it has paid its annual license fee
last due to the State of Washington, and is entitled
to defend suits or actions at law or equity in the

vs. A. S. Coats. 33

courts of the United States and in the State of Wash-
ington.

That the Siler Mill Company is now and was at all
of the times hereinafter in this answer mentioned
a corporation duly organized and existing under and
by virtue of the laws of the State of Washington,
and that it has paid its annual license fee last due
to the State of Washington, and is entitled to defend
suits or actions [32] at law or equity in the courts
of the United States and in the State of Washington.
That the Willapa Lumber Company is now and
was at all of the times hereinafter in this answer
mentioned a corporation duly organized and exist-
ing under and by virtue of the laws of the State of
Washington, and that it has paid its annual license
fee last due to the State of Washington, and is en-
titled to defend suits or actions at law or equity in
the courts of the United States and in the State of
Washington.

That the W. W. Wood Company is now and was
at all of the times hereinafter in this answer men-
tioned a corporation duly organized and existing
under and by virtue of the laws of the State of Wash-
ington, and that it has paid its annual license fee last
due to the State of Washington, and is entitled to
defend suits or actions at law or equity in the courts
of the United States and in the State of Washington.
That the Lebam Mill & Timber Company is now
and was at all of the times hereinafter in this an-
swer mentioned a corporation duly organized and ex-
isting under and by virtue of the laws of the State
of Washington, and that it has paid its annual license
fee last due to the State of Washington, and is en-

34 The Pacific State Bank

titled to defend suits or actions at law or equity in
the courts of the United States and in the State of
Washington.

That the Case Shingle & Lumber Company is now
and was at all of the times hereinafter in this an-
swer mentioned' a corporation duly organized and
existing under and by virtue of the laws of the State
of Washington, and that it has paid its annual license
fee last due to the State of Washington, and is en-
titled to defend suits or actions at law or equity in
the courts of the United States and in the State of
Washington. [33]

II.

That at all the times hereinafter mentioned the
Raymond Box Company, the bankrupt herein, was
and now is a corporation organized and existing
under and by virtue of the laws of the State of Wash-
ington, and has its principal place of business at
Raymond, Pacific County, Washington, and which

said last named corporation was, on or about the

day of , 1912, adjudged bankrupt by this

court.

III.

That subsequent to December 2d, 1910, the said
Raymond Box Company, the bankrupt herein, and
prior to the time that it was adjudged a bankrupt,
became indebted to and now is owing and indebted
to these answering creditors in the sums of money
set opposite their respective names as follows, to wit :

Pacific Transportation Company $160 . 77

Ra}Tiiond Transfer & Cold Storage Company 31 . 55

Cram Lumber Company 291.49

Raymond Foundry & Machine Company 229 . 50

vs. A. S. Coats. 35

Bell Brothers Hardware Company 75 . 12

Slier Mill Company 167 . 13

Willapa Lumber Company 2015.64

W. W. Wood) Company 2534.22

Pierce Brothers 2019 . 13

J. E. Gardner 620.46

Standard Tow Boat Company 32 . 00

Case Shingle & Lumber Company 519.14

Quinault Lumber Company 76 . 39

Lebam Mill & Timber Company 114.95

Fern Creek Lumber Company 307 . 53

Gus Baeopolus 15.90

Mike Daniel 2t2.80

Victor Agren 149.00

Wm. A. Clark ^74. 50

Jim Hamalas 22 . 85

Gus Pansgas 2S . 50

Abe Taylor 22.96

F. H. He^mer 24.50

L. E. Owens 133.50

Miles H. Leach 41.44

John Chepas 18 .48

E. M. Hatch 183.30

Chas. Herman 32.47

Ethel Owens I'^-^O

J. A. Schultz 1'7.90

E. N. Skinner 16.38

Strat Nelson 16-1^

Joseph Hatch 33.09

[34]

H. F. Klimmer 13.10

L. H. Osborne 20.65

Jim Jamison 16 . 20

36 The Pacific State Bank

E. Norwick 13.97

Frank Walan 24. 90

James Argeris 27 . 20

Arthur Bailey. . .' 17 . 88

Frank Sholes 29.35

Ben Vandeflow 115 .05

Ed Leacock 17.35

And the amount set opposite the respective name®
of these answering creditors is due and owing to
each of said creditors, and no part thereof has ever
been paid, and each of said creditors has filed his
claim herein in this bankruptcy proceeding for the
same, and said claim is now on file herein.

IV.

That neither one of said answering creditors
herein ever had any actual notice that said Raymond
Box Company ever executed or delivered to said
Pacific State Bank the promissory note of the instru-
ment which said Pacific State Bank alleges to be a
mortgage, until after said Raymond Box Company
became owing and indebted to each of these answer-
ing creditors.

That on December 2d, 1910, long prior thereto,
and ever since said time, the laws of the State of
Washington provided as follows, to wit:

That "certificates of acknowledgment of an in-
strument acknowledged by a corporation substan-
tially in the following form shall be sufficient:

State of ,

County, of , — ^ss.

On this day of , A. D. 190—, before

me personally appeared , to me known to

vs. A. S. Coats. 37

be the (president, vice-president, secretary, treas-
urer, or other authorized officer or agent, as the case
may'be) of the corporation that executed the within
and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed
of said corporation, for the uses and purposes therein
mentioned, and on [35] oath stated that he was
authorized to execute said instrument and that the
seal affixed is the corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set
my hand and affixed my official seal the day and year

first above written.

(Signature and title of officer.) "

And the said laws are found on page 245 of the
Session Laws of the State of Washington, for 1903.

VI.
That on and prior to December 2, 1910, and ever
since said date the laws of the State of Washington
provided and were as follows, to wit :

Sec. 3660. "A mortgage of personal prop-
erty is void as against creditors of the mort-
gagor or subsequent purchaser, and encum-
brancers of the property for value and in good
faith, unless it is accompanied by the affidavit
of the mortgagor that it is made in good faith,
and without any design to hinder, delay, or de-
fraud creditors, and it is acknowledged and
recorded in the same manner as is required by
law in conveyance of real property."

Sec. 3668. "A mortgage of personal prop-
erty must be recorded in the office of the county
auditor of the county in which the mortgaged

38 The Pacific State Bank

property is situated, in a book kept exclusively

for that purpose. "

VII.
Tha! the said mortgage which the petitioner, Pa-
cific State Bank, now seeks the leave of this Court
to foreclose, a copy of which mortgage is attached
to the said petition of said Pacific State Bank,
marked Exhibit ''A" and made a part thereof, is
invalid and void, is not a lien upon the premises and
property of the bankrupt therein described, the same
gives no preference rights to the said Pacific State
Bank, and is void, and the said Pacific State Bank
is without lawful right to enforce the same as a pre-
ferred; claim against said bankrupt estate, for the
following reasons:

(a) The said alleged mortgage, Exhibit ''A," was
never completely executed by the banlo-upt, and is
not the mortgage of the bankrupt under the laws of
the State of Washington, the facts of which will
more fully hereinafter appear. [36]

(b) The said mortgage was not executed and ac-
knowledged in accordance with the laws of the State
of Washington, was not entitled to registration under
the laws of the State of Washington, and the said
petitioner acquired neither lien nor right, whatso-
ever, in the property described therein by virtue of
said mortgage, and it is not entitled to foreclose the
same.

That the said mortgage, as will more fully appear
by inspection of the copy thereof, was not acknowl-
edged, substantially or otherwise, as required by law;
that a certificate of H. W. B. Hewen as a Notary
Public of the State of Washington, purporting to be

vs. A. S. Coats. 39

a certificate of acknowledgment, is attached to said
mortgage, but that it does not appear from said cer-
tificate that the said J. A. Heath and Miles H. Leach
were known to the said notary public to be the presi-
dent and secretary, respectively,- of said bankrupt
corporation; that it does not appear from said ac-
knowledgment that they, the said officers, acknowl-
edged the said instrument to be the free and volun-
tary act and deed of said corporation, nor that it
was the free and voluntary act and deed of said cor-
poration for the uses and purposes in said alleged
mortgage mentioned; nor that the said J. A. Heath
and Miles H. Leach stated on oath that they were
authorized to execute said instrument, nor does it
appear from said certificate of acknowledgment that
the said J. A. Heath and Miles H. Leach on oath
stated that the seal affixed was, in fact, the genuine
corporate seal of said bankrupt corporation ; nor does
said purported certificate of acknowledgment contain
any words or statements equivalent to those pre-
scribed by said statute, nor does said purported cer-
tificate of acknowledgment substantially, or in any
other manner, comply with the requirements of said
statute, or any of the laws of the State of Washing-
ton, and the said purported certificate of acknowl-
edgment is a mere nullity and of no greater weight
than if no certificate [37] of acknowledgment at
all had been attached to said alleged mortgage; that
the la\\^ of the State of "Washington require that all
conveyances of real estate, or of any interest therein,
and all contracts creating or evidencing any incum-
brance on real estate, shall be by deed, and that such
deed shall be in writing, signed by the party bound

•■'^ ±. KAJ\j

f/fvv uvu/vt> jaantc

thereby, and acknowledged by the party making it
before some person authorized by the laws of said
State to take the acknowledgment of deeds, and that
although the said alleged mortgage purports to have
been recorded in the real estate records of mortgages,
the same was not entitled to be recorded, and the said
purported mortgage is to all legal intents and pur-
poses an unrecorded, incomplete instrument.

VIII.
That by reason of the requirements of said Chap-
ter 132 of the Session Laws of Washington for 1903,
page 245, the sworn deposition of the officer or officers
seeking to execute a mortgage upon the property of
a corporation must be incorporated in the certificate
of acknowledgment endorsed upon or attached to
such mortgage, as a part of the execution of such
mortgage, and that such mortgage is not complete
until such deposition is made, taken and recorded in
such certificate of acknowledgment; and that because
the persons purporting to be the president and sec-
retary of said corporation and signing said alleged
mortgage, did not give their depositions that they
were authorized by such corporation to make such
mortgage, and that the seal alleged to be attached
to such mortgage was, in fact, the genuine seal of
such corporation; this respondent shows that the ex-
ecution of said mortgage was not consummated as
attempted, the same is no mortgage at all, and is not
a lien for any purpose upon the property therein
described.

IX.
That the indebtedness set forth in the note at-
tempted [38] be secured by said alleged mortgage

vs. A. S. Coats. 41

was not originally incurred upon the day of the date
of said mortgage ; that the said amount of indebted-
ness set forth in said note is the aggregate of divers
loans and discounts made by said petitioner to the
said bankrupt at various times, and long prior to said
December 2, 1910, which said previous indebtedness
so incorporated in said note and attempted to be
secured by said alleged mortgage prior to the date
of said note was not secured by mortgage upon any
of the property of the said bankrupt, if the same
was secured at all, and that at the time of the mak-
ing of said note, to wit, on December 2, 1910, the said
bankrupt was indebted to the said petitioner as it
had been for a long time previous thereto, as these
creditors are informed and believe, and charge the
truth to be, in a sum in excess of twenty thousand
dollars; that the said H. W. B. Hewen, the officer
whose name is appended to said certificate of ac-
knowledgment and whose acts the same purports to
certify and peiT)etuate, was at the time of the ex-
ecution of said note and the attempted making and
execution of said mortgage, and had ^been for a long
time prior thereto, a stockholder of and in the said
petitioner. Pacific State Bank, the same being a cor-
poration organized, created and carrying on business
under and by virtue of the laws of the State of Wash-
ington ; that the said H. W. B. Hewen, as such stock-
holder in said petitioner corporation, was beneficially
interested in the mortgage so sought to be made and
executed to the petitioner by the said bankrupt, and
would profit thereby in the proportion of the amount
of stock held by him to the entire capital stock of
said petitioner corporation, and it was not competent

4Q The Pacific State Bank

nor permissible nor lawful for the said H. W. B.
Hewen, being so materially interested, as aforesaid,
to take and receive such acknowledgment, nor to
make and record the same, and by reason of such
interest of said notary public the said certificate was
invalid and void. [39]

IXl/o.

That said instrument is also void and does not
constitute any lien on the property of said bankrupt
as against these answering creditors, for the reason
that said instrument was not recorded in the office
of the Auditor of Pacific County, Washington, as a
chattel mortgage, nor in a book kept in said county
Auditor's office, exclusively for that purpose; and
because said instrument was not recorded as a chattel ,
mortgage at all, the same having been recorded in the
record of real estate mortgages in the office of the
Auditor of said Pacific County, Washington, but was
never recorded in any book kept for chattel mort-
gages or used for the recording of chattel mortgages
in the office of the Auditor of said county at all, for
that chattel mortgage must, under the laws of the
State of Washington, be recorded in a book kept ex-
clusively for that puipose, and recording such chattel
mortgage or instrument purporting to be a chattel
mortgage in the real estate records in the office of the
Auditor in the county wherein such property is situ-
ated is not, under the laws of the State of Washing-
ton, actual or constructive notice to creditors of the
mortgage or subsequent purchasers, and said instru-
ment does not afford, under the laws of the State of
Washington, constructive notice of any lien on the

vs. A. S. Coats. 43

personal property of said mortgagor, and is void as
to these answering creditors of said bankrupt.

JXI/2.
That said mortgage or the execution thereof was
not authorized by either the Board of Trustees or
Stockholdei*s of said Raymond Box Co.

That none of the claims or the sums due to any of
these answering creditors are secured, but each of
the same is an imsecured claim and indebtedness
against said bankrupt corporation.

XI.

That the whole of the indebtedness of said cor-
poration, [40] including the amount of the in-
debtedness of these answering defendants, amounts
to the sum of about $36,902.00; that if the claim of
the Pacific State Bank, petitioner, is held to be a first
lien upon the properties of said bankrupt corpora-
tion, and if the property is now sold to satisfy said
pretended mortgage of said Pacific State Bank, then
there will be nothing left for these creditors or any
of them, but if the property is not sold, and if the
claim of the said Pacific State Bank is not held to
be a first lien or any lien upon said property of ^said
bankrupt, then these answering creditors will receive
at least some part or portion of the sum due them;
but if the claim of the Pacific State Bank is held to
be a first and prior lien, or held to be a lien at aU
upon the property of said bankrupt, and the prop-
erty is sold to satisfy the same, then there will not
be sufficient funds to pay the costs of the bankruptcy

44 The Pacific State Bank

proceedings, nor any of the claims of these cred-
itors.

XII.
These ans^vering creditors further aver, that H.
W. B. Hewen, who purports to have taken the ac-
knowledgment to said pretended mortgage of the Pa-
cific State Bank was, prior to and at the time of the
taking of said acknowledgment, to wit, on December
2d, 1910, ever since has been and now is, a stock-
holder in the said Pacific State Bank, and beneficially
interested therein; and these answering creditors
aver that for that reason that the said H. W. B.
Hewen was not qualified to take an acknowledgment
to an instriunent purporting to give unto said Pa-
cific State Bank a mortgage upon this property of
the bankrupt.

WHEREFOEE, these answering creditors pray
that the petition of the Pacific State Bank be denied;
that the instrument which is attached to said petition
and marked Exhibit "A" be declared [41] void
and of no avail, as against these answering creditors,
and that the same be held and adjudged not to be a
lien upon the property of any of the property of the
bankrupt, and that the said claim of the Pacific State
Bank be held and adjudged not to be prior or su-
perior to the claim or any of the claims of these an-
swering creditors, and that the claims of these an-
swering creditors be held to be entitled to payment
the same as the claim of the Pacific State Bank, and
that said instrument of the Pacific State Bank be
held not to be a mortgage, or a lien upon any of the
property of said bankrupt.

vs. A. S. Coats. 45

These answerlBg creditors further pray that this
court make and enter herein such other, further and
separate order as may be lawful, just and equitable.

WELSH & WELSH,
Attorneys for Answering Creditors.

State of Washington,
County of Pacific,— ss.

I, Martin C. Welsh, being first duly sworn, upon
my 'oath do depose and say, that I am one of the trus-
tees and am also the treasurer of the W. W. Wood
Company, which is a corporation of the State of
Washington, and is one of the answering creditors
herein; that I am authorized by the Board of Trus-
tees of said corporation to make this verification for
and on behalf of said corporation; that I have read
the above and foregoing answer and know the con-
tents thereof, and the same and the whole thereof is
true as I verily believe, and that I make this verifica-
tion'f or and on behalf of said W. W. Wood Company,
and also for and on behalf of the co-answering cred-
itors. _^.

MARTIN C. WELSH. [42]

Subscribed in my presence and sworn to before me
this 17th day of April, A. D. 1912.

[Seal] JOHN T. WELSH,

Notary Public for the State of Washington, Residmg
at South Bend in Said State.
Due and legal service of the within answer is ad-
mitted by copy received April 19, 1912.
H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for Pacific State Bank.

46 The Pacific State Bank

[Endorsed] : "Filed U. S. District Court, Western
District of Washington. Apr. 19, 1912. A. W.
Engle, Clerk. By James C. Drake, Deputy." [43]

Return of Trustee in Bankruptcy.

To the Honorable Judges of the Above-named Court,
and to the Honorable WARREN A. WORDEN,
Referee in Bankruptcy :
Comes now A. S. Coates, the Trustee in Bank-
ruptcy in the above-entitled matter, and for cause
why the petition of the Pacific State Bank for leave
to foreclose its certain alleged mortgage on the real
and personal property of the bankrupt herein should
not be granted, respectfully shows as follows:

This respondent, trustee as aforesaid, respectfully
shows unto the Court that the said mortgage which
the petitioner. Pacific State Bank, now seeks the
leave of this Court to foreclose, a copy of which mort-
gage is attached to the said petition of said Pacific
State Bank, marked Exhibit "A" and made a part
thereof, is invalid and void, is not a lien upon the
premises and property of the bankrupt therein de-
scribed, the same gives no preference rights to the
said Pacific State Bank, and is void, and the said
Pacific State Bank is without lawful right to enforce
the .same as a preferred claim against said bankrupt
estate, for the following reasons : [44]

(a) The said alleged mortgage, Exhibit " A, " was
never completely executed by the bankrupt, and is
not the mortgage of the bankrupt under the laws of

vs. A. S. Coats. 47

the State of Washington, the facts of which will more
fully hereinafter appear.

(b) The said mortgage was not executed and
acknowledged in accordance with the laws of the
State of Washington, was not entitled to registration
under the laws of the State of Washington, and the
said petitioner acquired neither lien nor right what-
soever, in the property described therein by virtue of
said mortgage, and it is not entitled to foreclose the

same.

And in support of the two foregoing causes, so
shown by this trustee, he states and alleges, as true,
the following facts :

That the said mortgage purports to be executed by
J. A. Heath as President, and Miles H. Leach as Sec-
retary of the bankrupt corporation; that at the time
of the making of the said mortgage, to wit, December
2, 1910, the laws of the State of Washington, the
same being still in force, provided the form and con-
tents of the acknowledgments of corporation to in-
struments executed and acknowledged by corpora-
tions, the same being Chapter 132 of the Session Laws
of Washington for 1903, page 245, and that such cer-
tificate of acknowledgments should be substantially
in the following form :

State of

County of , — ss.

On this day of -, A. D. 190— before

me personally appeared , to me known to

be the (president, vice-president, secretary, treasurer
or other authorized officer or agent, as the case may
be) of the corporation that executed the within and

48 The Pacific State Bank

foregoing instrument, and acknowledged the said in-
strument to be the free and voluntary [45] act
and deed of said corporation for the uses and pur-
poses therein mentioned, and on oath stated that he
was authorized to execute said instrument, and that
the seal affixed is the corporate seal of said corpora-
tion.

IN WITNESS WHEREOF I have hereunto set
my hand and affixed my official seal the day and year
first above written.

(Certificate and title of officer.)
— that the said mortgage, as will more fully appear
by inspection of the copy thereof, was not acknowl-
edged, substantially, or otherwise, as required by
law; that a certificate of H. W. B. Hewen, as a notary
public of the State of Washington, purporting to be
a certificate of acknowledgment, is attached to said
mortgage, but that it does not appear from said cer-
tificate that the said J. A. Heath and Miles H. Leach
were known to the said notary public to be the Pres-
ident and Secretary, respectively, of said bankrupt
corporation; that it does not appear from said
acknowledgment that they, the said officers, acknowl-
edged the said instrument to be the free and volun-
tary act and deed of said corporation, nor that it was
the free and voluntary act and deed of said corpora-
tion for the uses and purposes in said alleged mort-
gage mentioned; nor that the said J. A. Heath and
Miles H. Leach stated on oath that they were author-
ized to execute said instrument, nor does it appear
from said certificate of acknowledgment that the said
J. A. Heath and Miles H. Leach on oath stated that

vs. A. S. Coats. 49

the seal affixed was, in fact, the genuine corporate
seal of said bankrupt corporation ; nor does said pur-
ported certificate of acknowledgment contain any
words or statements equivalent to those prescribed
by said statute, nor does said purported certificate
of acknowledgment substantially, or in any other
manner, comply with the requirements [46] of
said statute, or any of the laws of the State of Wash-
ington, and the said purported certificate of acknowl-
edgment is a mere nullity and of no greater weight
than if no certificate of acknowledgment at all had
been attached to said alleged mortgage ; that the laws
of the State of Washington require that all convey-
ances of real estate, or of any interest therein, and
all contracts creating or evidencing any incumbrance
on real estate, shall be by deed, and that such deed
shall be in writing, signed by the party bound thereby,
and acknowledged by. the party making it before
some person authorized by the laws of said state to
take the acknowledgment of deeds, and that although
the said alleged mortgage purports to have been re-
corded, the same was not entitled to be recorded and
the said purported mortgage is to all legal intents
and purposes an unrecorded, incomplete instrument.

II.

This respondent, trustee as aforesaid, further re-
spectfully shows that by reason of the requirements
of said chapter 132 of the Session Laws of Washing-
ton for 1903, page 245, the sworn deposition of the
officer or officers seeking to execute a mortgage upon
the property of a corporation must be incorporated
in the certificate of acknowledgment endorsed upon

50 The Pacific State Bank

or attached to such mortgage, as a part of the execu-
tion of such mortgage, and that such mortgage is not
complete until such deposition is made, taken and re-
corded in such certificate of acknowledgment; and
that because the persons purporting to be the presi-
dent and secretary of said corporation and signing
said alleged mortgage, did not give their depositions
that they were authorized by such corporation to
make such mortgage, and that the seal alleged to be
attached to such mortgage, was, in [47] fact, the
genuine seal of such corporation; this respondent
shows that the execution of said mortgage was not
consummated as attempted, the same is no mortgage
at all, and is not a lien for any purpose upon the prop-
erty therein described.

III.
This respondent, trustee as aforesaid, further re-
spectfully shows, that the indebtedness set forth in
the note attempted to be secured by said alleged mort-
gage was not originally incurred upon the day of
the date of said mortgage ; that the said amount of
indebtedness set forth in said note is the aggregate
of divers loans and discounts made by said petitioner
to the said bankrupt at various times, and long prior
to said December 2, 1910, which said previous in-
debtedness so incorporated in said note and at-
tempted to be secured by said alleged mortgage prior
to the date of said note was not secured by mortgage
upon any of the property of the said bankrupt, if
the same was secured at all, and that at the time of
the making of said note, to wit, on December 2, 1910,
the said bankrupt was indebted to the said petitioner
as it had been for a long time previous thereto, as

vs. A. S. Coats. 51

this respondent is informed and believes and charges
the truth to be, in a sum in excess of twenty thousand
dollars; that the said H. W. B. Hewen, the of&cer
whose name is appended to said certificate of ac-
knowledgment and whose acts the same purports to
certify and perpetuate, was at the time of the execu-
tion of said note and the attempted making and
execution of said mortgage, and had been for a long
time prior thereto, a stockholder of and in the said
petitioner. Pacific State Bank, the same being a cor-
poration organized, created and carrying on business
under and by virtue [48] of the laws of the State
of Washington; that the said H. W. B. Hewen, as
such stockholder in said petitioner corporation, was
beneficially interested in the mortgage so sought to
be made and executed to the petitioner by the said
bankrupt, and would profit thereby in the propor-
tion of the amount of stock held by him to the entire
capital stock of said petitioner corporation, and it
was not competent nor permissible nor lawful for
the said H. W. B. Hewen, being so materially inter-
ested, as aforesaid, to take and receive such acknowl-
edgment, nor to make and record the same, and by
reason of such interest of said notary public the said
certificate was invalid and void.

IV.

This respondent, trustee as aforesaid, further re-
spectfully shows that a large portion of the property
described in the said alleged mortgage consists of
machinery, implements, furniture, movable fixtures
and other personal property not a part of the realty,
and that fully one-half of the property in value,

52 The Pacific State Bank

sought to be covered and incumbered by said mort-
gage is personal property and not realty; that sec-
tion 3660 of Rem. & Bal. Codes of the State of Wash-
ington provides that a mortgage of personal prop-
erty is void as against creditors of the mortgagor
unless the same is acknowledged and recorded in the
same manner as is required by law in conveyances of
real property; that the said mortgage was on Decem-
ber 8, 1910, recorded as a real estate mortgage in
Book 30 of Mortgages, page 31 of the records of said
Pacific County, as stated in said petition herein;
that because said mortgage was without a lawful cer-
tificate of acknowledgment the same was not entitled
to be recorded as a chattel mortgage; and that, as a
matter of fact and in truth, the said petitioner,
Pacific State Bank, has never recorded the [49]
said mortgage as a chattel mortgage, as required by
the statute above referred to, and the said mortgage
is wholly inoperative, ineffective and void as to the
personal property and property other than realty
therein described.

This respondent, trustee as aforesaid, further re-
spectfully shows, and reference is also had to the
schedule of property, list of creditors, etc., of the
bankrupt, filed in this court, that at the time of the
adjudication of bankruptcy herein, the said bankrupt
was indebted to sundry and divers persons upon
notes, acceptances, open accounts and otherwise in
the sum of $13,102.19, outside of and aside from any
and all indebtedness claimed in favor of the peti-
tioner. Pacific State Bank, all of which said claims
are unsecured, and that the total indebtedness of

vs. A. S. Coats. 53

said bankrupt amounts to the sum of more than
$36,902.17; that all of said unsecured indebtedness
and indebtedness to others than the petitioner, was
incurred by said bankrupt and accrued since and
after December 2, 1910; and that respondent is in-
formed and believes, and he charges the truth to be,
that all of the said unsecured creditors became such
creditors subsequent to December 2, 1910 ; that they,
the said creditors, collectively or individually, did
not have actual notice, constructive notice, or any
notice at all at the several times upon which they
became such creditors, of the existence of said alleged
mortgage ; that from and after December 2, 1910, the
said petitioner, Pacific State Bank, claimed to have
and hold a chattel mortgage upon said property, and
during all of said period while said bankrupt was
contracting additional debts, and up to the present
time, the said petitioner failed and has failed to
record said chattel mortgage in the manner required
[50] by law, and the statute referred to in para-
graph four hereof ; and this respondent therefore
shows and alleged that as against such subsequent
and unsecured creditors the said alleged mortgage is
invalid, and that in proof of the facts herein stated
certain of said unsecured creditors have filed with
this respondent their affidavits, which are attached
to this return, marked Exhibits ''A," ''B," ''C,"
uj) n ^'j] " ''F," ''G," and "H," and the same are

made a part hereof.

VI.
This respondent, trustee as aforesaid, further re-
spectfully shows that, prudently handled and rea-
sonable time being permitted, the real and personal

54 The Pacific State Bank

property comprising the assets and estate of said
bankrupt can be sold for an amount sufficient to pay
all claims against said estate, and the costs of ad-
ministering the same, but that in order to accomplish
this object entire harmony of effort among the sev-
eral creditors of said estate is absolutely necessary;
that said petitioner, Pacific State Bank, is a creditor
to the amount of nearly two-thirds of the entire lia-
bilities of said bankrupt; that if said petitioner is
permitted, under the order of this Court, to fore-
close its alleged mortgage, the said petitioner will be
concerned only in securing upon such sale an amount
sufficient for its own purposes and no more, and the
burden will be upon the said other and unsecured
creditors not only to secure a purchaser willing to
pay the amount of said alleged mortgage debt, but an
amount sufficiently in excess of such alleged mort-
gage debt to pay the expenses of administration, the
claims for labor and an amount in addition to be paid
on their own claims sufficient to warrant their per-
sonal efforts in that direction; and that if said peti-
tioner, Pacific State Bank, is [51] permitted to
foreclose its alleged mortgage and to sell said prop-
erty to satisfy its claim, this respondent avers that,
owing to the present general unsettled financial con-
dition of the country, an amount greater than said
alleged mortgage indebtedness will not be obtained,
and there will not be a dollar of surplus to pay the
expenses of administration, attorneys' fees, labor
claims or said unsecured claims.

VII.

This respondent, trustee as aforesaid, further re-

vs. A. S. Coats. 55

spectfully shows that the nature of the property com-
prising the bankrupt estate, as an inspection of the
description thereof in said alleged mortgage will
show, is not such as will deteriorate in value by non-
use to any material or even appreciable extent, and
the loss from said property and machinery lying
idle for a few months should have no weight in the
consideration of said petition ; that ^^dth proper care
from the caretaker, no material damage can result
to said property from idleness and there are no ex-
penses to be incurred for rents or operating expenses ;
that the general lumber business and the financial
times, generallv, for the past four or five years, have
been at a low ebb, but that there is now a noticeable
improvement therein, and this respondent believes
and submits, as a matter of general observation, that
after the national nominating conventions in June
shall have been held business conditions in the United
States will so radically and materially improve that
the value of the said bankriipt estate in six months
from now will be very much greater than at any time
during the next two months, and this respondent,
after a long experience in the wood product business,
respectfully tenders his belief and conviction that a
sale of the property of said estate in the near future
will be detrimental [52] to the interest of the
creditors and ill-advised.

VIII.
This respondent, trustee as aforesaid, further re-
spectfully shows, that he makes this return and pro-
tests against the granting and allowing of the said
petition of the said Pacific State Bank for the leave

56 The Pacific State Bank

of this Court to foreclose its said alleged mortgage,
not only as trustee of the said bankinipt and as the
official representative of the unsecured creditors of
said bankrupt, in the general discharge of the duties
required of him by law, but, also, especially, by, at
and upon the personal request of a considerable ma-
jority of the unsecured creditors of said bankrupt.
AVHEREFORE: this respondent prays that the
said petition of the said Pacific State Bank for leave
to foreclose its said alleged mortgage be denied and
overruled, to the end that, ultimately, the said peti-
tioner shall be required to participate in the assets
of said estate to the same extent and upon the same
footing as the other unsecured creditors, only.

A. S. COATS,
Trustee. [53]
State of Washington,
County of Pacific,— ss.

A. S. Coates being diily sworn, according to law,
deposes and says as follows :

1. That he is the duly elected, qualified and act-
ing trustee in bankruptcy of the mthin entitled bank-
rupt estate.

2. That he has read the foregoing return to the
said order of this Court to show cause, subscribed by
him ; that he knows the contents thereof, and that the
facts therein stated are true, excepting as to such
matters as are stated upon his information and be-
lief, and as to such matters he believes the same to
be true.

A. S. COATS.

vs. A. S. Coats. 57

Subscribedi and sworn to before me this 17th day
of April, A. D. 1912.

[Seal] F. D. COUDEN,

Notary Public for the State of Washington, Resid-
ing at Raymond in Said County.

CHAS. E.MILLER,

Attorney for Trustee, South Bend, Wash.
[54]

Exhibit '*A" [to Return of Trustee].

In the United States District Court, for the Western

District of Washington, Southern Division.
In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Afl&davit of Samuel McMurran.

State of Washington,
County of Pacific,— ss.

Samuel McMurran, being first duly sworn, upon
oath deposes and says: That he is a resident of Ray-
mond, Pacific County, Washington; that he is em-
ployed as bookkeeper for the W. W. Wood Company
of this city; that he has had 25 years' experience as
a bookkeeper.

That on or about the 15th day of February, 1912,
A. S. Coats, who was then temporary receiver for
the Raymond Box Company, delivered to him all the
books, statements, checks, accounts and records of
the Raymond Box Company, and requested that he
audit the books and prepare a statement, and that
thereafter he did examine and audit said books and
accounts of the Raymond Box Company, and from
the audit so made, found, and now finds that the pur-

58 The Pacific State Bank

ported mortgage now held by the Pacific State Bank,
and which the bank alleges was given by the Ray-
mond Box Company to secure a note in the simi of
$33,400.00 was given and dated on December 2, 1910,
and was given for a pre-existing debt.

That at the time said purported mortgage was
given as aforesaid, the amount due thereon was the
only sum which the Raymond Box Company then
owed and at that time it had no indebtedness what-
ever, except the amount due on said note and pur-
ported mortgage, and all of the accounts which it now
owes and which was owing at the time it was adju-
dicated a bankrupt, have been created since the ex-
ecution of said instrument, and said accounts in ad-
dition to the amount due to said bank, amount in the
aggregate to about $14,000.00.

That all of the creditors shown on the statement
filed in the above proceedings by A. S. Coats and all
of the creditors which have presented claims in the
above-entitled matter, became creditors of the Ray-
mond Box Company after the execution of said pur-
ported mortgage. [55]

SAMUEL McMURRAN.

Subscribed and sworn to before me this 15th day
of April, A. D. 1912.

[Seal] MARTIN C. WELSH,

Notary Public in and for the State of Washing-ton,
Residing at Raymond, Washington. [56]

vs. A. S. Coats. 59

Exhibit **B" [to Return of Trustee].

In the United States District Court, for the Western

District of Washington, Southern Division.
In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Affidavit of Miles Leach.

State of Washington,
County of Pacific,— ss.

^liles Leach, being first duly sworn, upon his oath
deposes and says: That he now is, and at all the
times hereinafter mentioned, has been the secretary
of the Raymond Box Company, the above named
bankrupt; that he is familiar with the books of said
bankrupt and with the amount due and owing the
various creditors and knows approximately the date
and the indebtedness due each creditor was con-
tracted.

That on or about the 2d day of December, 1910,
said Raymond Box Company became indebted to the
Pacific State Bank of South Bend, Washington, in
the sum of $23,400.00, which is the same indebtedness
which the Pacific State Bank, aforesaid, claims is
secured by the said instrument, which said bank al-
leges to be mortgage, and which is attached to its
petition in the above-entitled cause, wherein it asks
permission to foreclose said purported mortgage.

That at the time said bankrupt became indebted
to said bank as aforesaid, it was not indebted to any
other person, firm or corporation, and all of the in-
debtedness which it now owes and which it owed at

60 The Pacific State Bank

the time of the adjudication of bankruptcy, was con-
tracted after the execution of said instrument, which
the Paciiic State Bank is attempting to foreclose as
a mortgage, and all of the creditors which are now
creditors of said bankrupt, became such creditors
atter the execution of said instrument.

MILES H. LEAOH.
Subscribed and sworn to before me this 13th day
of April, A. B. 1912.

f ^^^^J MARTIN O. WELSH

Notary Public in and for the State of Washington
Residmg at Raymond in Said State. [57]

Exhibit ''C" [to Return of Trustee].
In the United States District Court, for the Western

District of Washington, Southern Division.
In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Affidavit of Ralph aerber.

State of Washington,
County of Pacific,— ss.

Ralph Ger^rer, being first duly sworn, upon his
oath deposes and says: That he is now and during all
the times hereinafter mentioned, has been the man-
ager of the Raymond Foundry & Machine Company
one of the creditors of the Raymond Box Company,'
Bankrupt "^

That the indebtedness due said Raymond Foundry
& Machine Company was contracted long after the
2d day of December, 1910, and at the time said debt
was contracted and the credit extended to the Ray-

vs. A. S. Coats. 61

mond Box Company, said Raymond Foundry & Ma-
chine Company, did not have, nor neither did any
of its agents have any actual knowledge that the
Pacific State Bank claimed to have a mortgage on the
property of said Raymond Box Company.

RALPH GERBER.

Subscribed and sworn to before me this 13th day
of April, A. D. 1912.

[Seal] MARTIN C. WELSH,

Notary Public in and for the State of Washing-ton,
Residing at Raymond in Said State. [58]

Exhibit **D" [to Return of Trustee].

In the United States District Court, for the Western

District of Washington, Southern Division.
In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Affidavit of W. S. Cram.

State of Washington,
County of Pacific, — ^ss.

W. S. Cram, being first duly sworn, upon his oath
deposes and says: That he now is and during all the
times hereinafter mentioned has been the secretary
of the Siler Mill Company, one of the creditors of
the Raymond Box Company, Bankrupt. That the
indebtedness due said Siler Mill Company was con-
tracted long after the 2d day of December, 1910, and
at the time said debt was contracted and the credit
extended to the Raymond Box Company, said Siler
Mill Company did not have, nor neither did any of
its agents have any actual knowledge that the Pa-

62 The Pacific State Bank

cific State Bank claimed to have a mortgage on the
property of said Raymond Box Company.

W. S. CRAM.

Subscribed and sworn to before me this 13th day
of April, A. D. 1912.

[Seal] MARTIN C. WELSH,

Notary Public in and for -the State of Washing-ton,
Residing at Raymond in Said State. [59]

Exhibit **E" [to Return of Trustee].

In the United States District Court, for the Western
District of Washington, Southern Division.

In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Afl&davit of F. C. Schoemaker.

State of Washington,
County of Pacific, — ss.

F. C. Schoemaker, being first duly sworn, upon his
oath deposes and says: That he now is, and during
all the times hereinafter mentioned, has been the sec-
retary of the Willapa Lumber Company, one of the
creditors of the RajTuond Box Company, Bankrupt.
That the indebtedness due said Willapa Lumber
Company was contracted long after the 2d day of
December, 1910, and at the time said debt was con-
tracted and the credit extended to the Raymond Box
Company, said Willapa Lumber Company did not
have, nor neither did any of its agents have any ac-
tual knowledge that the Pacific State Bank claimed
to have a mortgage on the property of said Raymond
Box Company.

F. C. SCHOEMAKER.

vs. A. S. Coats, 63

Subscribed and sworn to before me this 13th day
of April, A. D. 1912.

[Seal] MARTIN C. WELSH,

Notary Public in and for the State of Washington,
Eesiding at Raymond in Said State. [60]

Exhibit *T" [to Return of Trustee].
In the United States District Court, for the Western

District of Washington, Southern Division.
In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Affidavitof A. S. Coats.

State of Washington,
County of Pacific,— ss.

A. S. Coats, being duly sworn, upon his oath de-
poses and says: That he now is and at all the times
hereinafter mentioned has been the manager of the
W. W. Wood Company, one of the creditors of
the Raymond Box Company, Bankrupt. That the
indebtedness due said W. W. Wood Company
was contracted long after the 2d day of December,
1910, and at the time said debt was contracted
and the credit extended to the Raymond Box Com-
pany, said W. W. Wood Company did not have, nor
neither did any of its agents have any actual knowl-
edge that the Pacific State Bank claimed to have a
mortgage on the property of said Raymond Box
Company. ^ ^^ ^^^^^

64: The Pacific State Bank

Subscribed and sworn to before me this 13th day
of April, A. D. 1912.

[Seal] MARTIN C. WELSH,

Notary Public in and for State of Washington, Re-
siding at Raymond, Wash. [61]

Exhibit ''&" [to Return of Trustee].

In the United States District Court, for the Western
District of Washington, Southern Division.

In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Affidavit of R. V. Pearce.

State of Washington,
County of Pacific, — ss.

R. V. Pearce, being first duly sworn, upon his oath
deposes and says: That he is a member of the firm
of Pearce Bros., one of the creditors of the Raymond
Box Company, the above-named bankrupt, and that
Pearce Bros, have presented their claim and filed the
same in said bankruptcy proceedings; that the in-
debtedness due Pearce Bros, by the Raymond Box
Company was contracted long after the 2d day of
December, 1910, and at the time said indebtedness
was contracted, affiant did not know, and neither did
any member of the firm of Pearce Bros, know that
the Pacific State Bank of South Bend, Washington,
claimed to hold a mortgage on the property of the
Raymond Box Company, but on the contrary, before
the credit was extended to the Raymond Box Com-
pany, affiant knew that the Raymond Box Company
was banking with the Pacific State Bank and affiant
interviewed Lester Homan, the cashier of said bank

vs. A. S. Coats. #

and advised with him relative to extending credit to
the Raymond Box Company, and Mr. Homan advised
affiant that it was perfectly safe.

That at the time that affiant talked with Mr.
Homan as above recited, affiant knew absolutely
nothing about the financial condition of the Raymond
Box Company, and would not have extended it any
credit whatever, had it not been for the^ statements
and representations of Mr. Homan, which affiant be-
lieved at that time to be true, and he believed that
Mr. Homan was in a position to know and did know
the financial condition of said bankrupt.

RALPH V. PEARCE.

Subscribed and sworn to before me this 17th day
of April, A. D. 1912. [62]

rSeal] MARTIN C. WELSH,

Notary Public in and for the State of Washington,
Residing at Raymond in Said State. [63]

Exhibit ''H" [to Return of Trustee].

In the United States District Court, for the Western

District of Washington, Southern Division.
In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Affidavit of T. H. BeU.
State of Washington,
Counity of Pacific,— ss.

T. H. Bell, being first duly sworn, upon his oath
deposes and says: That he is now and during all the
times hereinafter mentioned has been the manager of
the Pacific Transportation Company, one of the

66 TJie Pacific State Bank

creditors of the Raymond Box Company, Bankrupt.
That the indebtedness due said Pacific Transporta-
tion Company was contracted long after the 2d day
of December, 1910, and at the time said debt was con-
tracted and the credit extended to the Raymond Box
Company, said Pacific Transportation Company, did
not have, nior neither did any of its agents have any
actual knowledge that the Pacific State Bank claimed
to have a mortgage on the property of said Raymond
Box Company.

T. H. BELL.

Subscribed and sworn to before me this 13th day
of April, A. D. 1912.

[Seal] MARTIN C. WELSH,

Notary Public in and for the State of Washington,
Residing at Raymond, Wash.

[Endorsed] : "Filed U. S. District Court, Western
District of Washington. April 19, 1912. A. W.
Engle, Clerk. James C. Drake, Deputy." [64]

Replication to Ansv/er,
The Pacific Staite Bank, petitioner herein, saving
and reserving to itself all and all manner of ad-
vantages of exception which may be had and taken
to the manifold errors, uncertainties and insuffi-
ciencies of the answer of the creditors to the petition
of the Pacific State Bank, for replication thereunto
saith that it doth and will aver, maintain, and prove
its said bill to be true, certain, and sufficient in the
law to be answered unto by the said creditors, and
that the answer of the said creditors is very uncer-

vs. A. S. Coats. 67

tain evasive, and insufficient in law to be replied unto
by tiiis replicant ; without that, that any other matter
or thing in the said answer contained, material or
effectual in the law to be replied unto, and not herein
and herebv well and sufficiently replied unto, con-
fessed, or avoided, traversed, or denied, is true; all
which matters and things this replicant is ready to
aver, maintain, and prove as this Honorable Court
shall direct, and humbly prays as in and by its said
bill it hath already prayed.

H. W. B. HEWEN,
HAYDEN & LANGHOENE,
Solicitors for Petitioner, 408 Perkins Bldg, Tacoma,
Wash.
[Endorsed] : ''Filed U. S. District Conrt, Western
District of Washington. Aug. 27, 1912. A. W.
Engle, Clerk. E. W. Jamieson, Deputy." [65]

Replication to Return of Trustee.

The Pacific 8tate Bank, petitioner herein, saving
and reserving to itself all and all manner of ad-
vantages of exception which may be had and taken
to the manifold errors, uncertainties and insuffi-
ciencies of the return of the trustee to the petition of
the Pacific State Bank, for replication thereunto
saith that it doth and will aver, maintain and prove
its said petition to be true, certain, and sufficient in
the law to be answered unto by the said creditors, and
that the answer of the creditors is very uncertain,
evasive and insufficient in law to be replied unto by
this replicant; without that, that any other matter

68 The Pacific State Bank

or thing in the said answer contained, material or
effectual in the law to be replied unto, confessed, or
avoided, traversed, or denied, is true ; all which mat-
ters and things this replicant is ready to aver, main-
tain, and prove as this Honorable Court shall direct
and humbly prays as in and by its said bill it hath
already prayed.

H. W. B. HEWEN,
HAYDEN & LANGIHORNE,
Solicitors for Petitioner, 408 Perkins Bldg., Tacoma,
Wash.

[Endorsed] : ''Filed U. S. District Court, Western
District of Washington. Aug. 27, 1912. A. W.
Engle, Clerk. R. W. Jamieson, Deputy." [66]

Affidavit of M. H. Leach.

M. H. Leach, being first duly sworn, on oath says :
That he was on the 2d day of December, 1910, the
duly elected and qualified secretary of the Raymond
Box Company, a corporation, and mortgagor in that
certain instrument dated December 2d, 1910, to the
Pacific State Biank, a corporation, with its principal
place of business at South Bend, Washington;

That at the time of the execution and delivery of
said mortgage, the same being in the sum of Twenty-
three Thousand Four Hundred ($23,400.00) Dollars,
J. A. Heath, who executed said mortgage as president
of said corporation, and this affiant, who executed
said mortgage as secretary thereof, were the sole
trustees of said corporation, and the owners of all
of the capital stock thereof;

vs. A. S. Coats. 69

That the corporate seal attached to said mortgage
was and is the authorized corporate seal of the Ray-
mond Box Company, mortgagor, and was affixed to
said mortgage by this affiant as secretary thereof.

MILES H. LEACH.
Sworn to and subscribed before me this sixteenth
day of April, A. D. 1912.

[Seal] H. W. B. HEWEN,

Notary Public in and for the State of Washington,
Residing at South Bend, in Said State.
[Endorsed] : "Filed U. S. District Court, Western
District of Washington. Aug. 27, 1912. A. W.
Engle, Clerk. R. W. Jamieson^ Deputy." [67]

In the Superior Court of the State of Washington,

in and for the County of Pacific.
ALEXANDER McKENZIE, Administrator of the
Estate of EFFIE A. McKENZIE, Deceased,

Plaintiff,
vs.

J. ALBERT HEATH,

Defendant.

Findings of Fact and Conclusions of Law.
Be it remembered that the above-entitled action
came on regularly for trial on the 17th day of Feb-
ruary, A. D. 1912, in said court, before the Honorable
Sol Smith, Judge of said court, the plaintiff being
represented by his attorney of record, Fred M. Bond,
and the defendant having not appeared m said cause.
And that more than 20 days have elapsed since said
service of the summons and complaint upon the de-

70 The Pacific State Bank

f endant, which was a personal service at the City of
Raymond, Pacific County, Washington, as appears
b}^ the files and records in this cause. And the said
defendant having been duly defaulted for not appear-
ing or demurring, or answering said complaint, and
the Court having taken and heard all of the testi-
mony on the part of the plaintiff, and after being
duly advised in the premises, rendered its opinion
that the plaintiff was entitled to recover for the sums
demanded in his complaint, and directed Findings of
Fact and Conclusions of Law to be as follows, to wit :

That the plaintiff is the duly, legally, and qualified
administrator of Ef&e A. McKenzie, deceased, and
that he has the right to carry on this action, he being
substituted as plaintiff in the name of Effie A. Mc-
Kenzie as the records now on file in this case more
fully show.

That Effie A. McKenzie, the original plaintiff in
the above-entitled action, on the 5th day of Septem-
ber, 1910, departed this life at the City of Eaymond,
Pacific [68] County, Washington, and that prior
to her death and at the time of commencing this ac-
tion she was a bona fide resident of said city of Ray-
mond.

That after her death, and, to wit : On the 7th day
of November, 1910, the above-named administrator,
Alexander McKenzie, administrator, of said state,
was duly and legally appointed administrator of said
estate of said Effie A. McKenzie, deceased; and that

vs. A. S. Coats. 71

thereafter, to wit, on the 10th day of March, 1911,
said administrator duly and legally qualified accord-
ing to law, and the letters of administration were on
that date issued to him, giving him authority to
handle and close up said estate.

4.
That at the time of commencing of the above said
action, the said defendant, J. Albert Heath, was a
resident of the city of Eaymond, Pacific County,
State of Washington. And that on February 1st,
1907, said defendant executed to plaintiff his certain
promissory note in writing for the sum of Three
Hundred ($300.00) Dollars, which certain note was
due and payable six months after date.

5.
That after the execution of the above said promis-
sory note the said defendant paid on said promissory
note, to Effie A. McKenzie, the sum of One Hundred
($100.00) Dollars, and that there is now due and
owing on said note the smn of Two Hundred
($200.00) Dollars, and interest on the same at six per
cent per annum from February 1st, 1907; and that
the said party was the owner of said note at the time
of her death.

6.
That the said defendant, on or about May 1st, 1908,
[69] entered into a written agreement with the
plaintiff whereby the said defendant, for valuable
considerations, did sell to the said Effie A. McKenzie
an undivided one-half interest in forty shares of the
capital stock of the Raymond Box Co. under the
following conditions:

72 The Pacific State Bank

1st. Defendant reserved the right to vote all
shares of stock at any of the meetings of the company.

2d. Said stock to be not transferable.

3d. Stock to be turned over in the regular way
by certificate by the said defendant to the said Effie
A. McKenzie as soon as the present certificates are
released from bank, where the same are held as se-
curity for a loan to the Eaymond Box Co.

That since the making and entering into of the con-
tract last above mentioned, and to wit: During the
month of August, 1910, the said defendant absolutely
converted said stock to his own use and sold and
transferred and delivered the same to other parties,
and collected the cash for the same.

That the value of said shares of stock on the 1st
day of May, 1908, and also on the date that the de-
fendant converted the same to his own use, were rea-
sonably worth the sum of Two Thousand ($2,000.00)
Dollars. And that the said Effie A. McKenzie on
the said date. May 1st, 1908, paid to the said defend-
ant the sum of Two Thousand ($2,000.00) Dollars in
cash, for said interest.

That since the starting of the above said action the
said defendant paid to the above-named plaintiff,
said administrator of the estate of Effie A. McKenzie,
deceased, the sum of Fifty ($50.00) Dollars on said
contract, leaving a balance of One Thousand Nine
Hundred Fifty ($1,950.00) Dollars. [70]
And that- there is now due and owing from the de-

vs. A. S. Coats. 73

fendant to the said estate the sum of One Thousand
Nine Hundred Fifty ($1,950.00) Dollars, and in-
terest on the same at six per cent from the 1st day

of May, 1908.

And as conclusions of law from the foregoing find-
ings of fact, the Court concludes as follows :

That the plaintiff is entitled to a judgment against
the defendant, J. Albert Heath, for the sum of Two
Thousand One Hundred Fifty ($2,150.00) Dollars
principal, and the sum of Four Hundred Ninety-four
($494.00) Dollars, interest on said amount up to the

present day.

Done in open court this 17th day of February, A. D.

1912.

SOL. SMITH,

Judge of Said Court.
Filed April 18th, 1912. E. A. Seaborg, Clerk. By
K. S. Van Tuyl, Deputy. [71]
In the Superior Court of the State of Washington

in amd for the County of Pacific.
ALEXANDER McKENZIE, Administrator of the
Estate of EFFIE A. McKENZIE, Deceased,

Plaintiff,

vs.

J. ALBERT HEATH,

Defendant.

Judgment.

In this action the defendant above named having

been regularly served with process and summons and

complaint in the above-entitled action, personally on

the 12th day of August, 1910; and that more than

74 The Paciiic State Bank

twenty days having elapsed since said service, and
that due proof of said service has been filed with the
Clerk of said conrt in the above-entitled action. And
the defendant mot having appeared in said action,
nor filed any answer nor demurrer to the complaint
filed therein, and the default of said defendant, J.
Albert Heath, and the premises, having been duly
taken and entered according to law. And witnesses
for the plaintiff having been duly sworn and testified,
the cause submitted to the Court for consideration
and decision, and after due deliberation thereon the
Court files its findings and decision in writing, and
orders that judgment be rendered herein in favor of
plaintiff in accordance therewith.

WHEREFORE, by reason of the law and the find-
ings aforesaid, it is ordered, adjudged, and decreed
that the plaintiff do have and recover of and from the
defendant a judgment for the sum of Two Thousand
Six Hundred Forty-four ($2,644.00) Dollars and
costs of this action to be taxed.

Done in open court this 17th day of February,
1912.

SOL. SMITH,
Judge of Said Court.

Filed April 18, 1912. E. A. Seaborg, Clerk. By
R. S. Van Tuyl, Deputy. [72]

State of Washington,
County of Pacific, — ss.

I, E. A. Seaborg, Clerk of the Superior Court of
the county and State aforesaid, hereby certify the
foregoing to be a full, true and correct copy of the
Findings of Fact and Conclusions of Law of the

vs. A. S. Coats, ^^

Judgment in cause numbered 2809, entitled, Alex-
ander McKenzie, Administrator of the Estate of
Effie A. McKenzie, deceased, plaintiff, versus J.
Albert Heath, defendant. That I have compared the
same with the original and is correct transcript
thereof as the same remains on file and of record m

my office.

Witness my hand and the seal of said Superior

Court this l&th day of April, 1912.

l-g^^lj E. A. SEABORG,

Clerk of Superior Court.

[Endorsed] : "Filed U. S. District Court, Western
District of Washington. Aug. 27, 1912. A. W.
Engle, Clerk. R. W. Jamieson, Deputy." [73]

Motion [to Amend Petition].

Now comes The Pacific State Bank and moves the
Court that it be allowed to amend its Petition herein,
a copy of which amendment is attached hereto,
marked Exhibit "A," the said amendment to begin
at the end of line 28 of page 3 of the Petition.

This Motion is based upon the entire records and
files of this cause and upon the Affidavit of H. W. B.
Hewen, attached hereto.

H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for Pacific State Bank. [74]

76 The Pacific State Bank

United States District Court, Western District of
Washington, Southern Division.

No. .

EXHIBIT "A."

In the Matter of RAYMOND BOX COMPANY,
Bankrupt.

Amendment to Petition of the Pacific State Bank.

"That said mortgage and the note secured thereby
were executed on behalf of the corporation of Ra}^-
mond Box Company, bankmpt, by J. A. Heath and
Miles H. Leach, its President and Secretary, respect-
ively, the said Heath and the said Leach being all of
the trustees of said corporation and being the owners
of all of the capital stock of said corporation and being
in sole control of said corporation, and said corpora-
tion accepted and retained the benefits of said trans-
action.

WHEREFORE, the Raymond Box Company and
the trustee in bankruptcy and the creditors of the
corporation, are estopped to deny the authority of
said officers to execute said mortgage on behalf of
said corporation. ' '

H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for Pacific State Bank. [75]

vs. A. S. Coats. 77

United States District Court, Western District of
Washington, Southern Division.

In the Matter of RAYMOND BOX COMPANY,
Bankrupt.

VERIFIOATION.

United States of America,
District of Washington,
Western Division, — ss.

Joseph G. Heim, being first duly sworn, deposes
and says on oath deposes and says: That he has read
the foregoing proposed amendment, knows the con-
tents thereof and that the same are true. That I
am president of said Pacific State Bank and make
this verification in behalf of same.

JOSEPH O. HEIM.

Subscribed and sworn to before me this 5th day
of August, 1912.

[Seal] H. W. B. HEWEN,

Notary Public in and for the State of Washington,
Residing at South Bend Therein. [76]

United States District Court, Western District of
Washington, Southern Division.

No. .

In the Matter of RAYMOND BOX OOMPANY,

Bankrupt.

Affidavit of H. W. B. Hewen.

United States of America,
District of Washington,
Western Division, — ss.
H. W. B. Hewen, being first duly sworn, deposes

78 The Pacific State Bank

and says on oath that he is one of the attorneys for
the Pacific State Bank, a corporation, petitioner
herein. That the amendment sought to be made to
the petition by petitioner is not sought for the pur-
pose of vexation or delay, but that the matter of the
proposed amendment is, in the opinion of affiant,
material, and could not with reasonable diligence
have been introdoiced sooner into the petition.

That the question of the validity of the mortgage
of the petitioner was submitted to the Honorable C.
H. Hanford by oral stipulation to the above Court
between counsel in open court, and that the record
then before the Court on the petition for review of
the order of the referee, granting leave to petitioner
to foreclose its mortgage, should be considered to be
before the Hon. C. H. Hanford for the purpose of
determining the validity of said mortgage. That
actual execution of said mortgage by bankrupt was
not questioned either upon argument or in the plead-
ings, excepting upon the grounds of the alleged in-
sufficiency of the acknowledgment and upon the
alleged failure to record the mortgage as a chattel
[77] mortgage, although it was admitted to have
been filed as a chattel mortgage and recorded as a
real estate mortgage. That until the opinion of the
Honorable C. H. Hanford was promulgated, affiant
and all of the attorneys for the petitioner, and as
affiant believes, the attorneys for the trustee and for
the creditors, did not consider that the authority of
the president and secretary of said corporation to
execute said instrument was in issue, but in view of
the said o]3inion being promulgated, affiant and the

vs, A. S. Coats. 79

other attorneys for the petitioner believe it only pru-
dent to amend the petition so as to allege an estoppel
and to conform to the proof actually and without
objection admitted.

Further af&ant saith not. -r-r-r.TTTT.xT

H. W. B. HEWEN.

Subscribed and sworn to before me this 5th day
of August, 1912.

[Seal] P. W. RHODE,

Notary Public in and for the State of Washington,
Residing at South Bend Therein.

[Endorsed] : "Filed U. S. District Court, Western
District of Washington. Aug. 7, 1912. A. W. En-
gle, Clerk. R. W. Jamieson, Deputy." [78]

[Order Granting Pacific State Bank Leave to
Amend Petition, and Denying Offer of Attorney
for Trustee.]

The motion of Pacific State Bank for leave to
amend its petition herein by adding certain words,
beginning at the end of line 28, on page 3 of the peti-
tion, coming on this day to be heard, the said bank
appearing by H. W. B. Hewen and Messrs. Hayden
& Langhorne, its attorneys ; the trustee appearing by
Charles E. Miller, his attorney, and certain creditors
claiming the right to appear by Messrs. Welsh &
Welsh ; it appearing to the Court that due notice of
said application has been given and that said motion
for leave to amend is in effect only to conform with
the proof introduced without objection, and although
the trustee offered upon said motion the following
exhibit, marked "Exhibit No. 1," to wit:

80 The Pacific State Bank

[EXHIBIT NO. 1.]

Affidavit of Charles E. Miller in Opposition to
Motion to Amend Petition.

State of Washington,
County of Pierce, — ss.

Charles E. Miller of Pacific County, being duly
sworn according to law deposes and says as follows :

1. That he is now and has been for thirty-eight
years last past a licensed attorney at law, following
his profession as such for his entire ten years of resi-
dence at South Bend in said County of Pacific.

2. That for eight years last past, he has been ac-
quainted with J. A. Heath, the President of said
bankrupt Raymond Box Company; that he has
known Effie A. Scott during her lifetime, was well
acquainted wdth her for thirty years ; that said Effie
A. Scott was on May 1st, 1908, a resident of Ray-
mond, said County of Pacific, and was employed as
housekeeper by the said J. A. Heath at the boarding
house of said Bankrupt plant.

That on or about May 1st, 1908, the said J. A.
Heath sold an equal and undivided half interest of
forty shares of the capital stock of the said Bank-
rupt Company, which transaction was evidenced by
said parties [79] by the written instrument, a
copy of which is herewith attached and marked Ex-
hibit "A"; and that as attorney of Effie A. Scott,
deponent made demand on said J. A. Heath of said
stock, the said Heath, then and there admitted to
this deponent that he had entered said contract with
Effie A. Scott, that she was owner of the shares

vs. A. S. Coats, 81

therein described, that all of said shares had been
deposited in the Pacific States Bank as collateral
security for a loan and that as soon as a release couM
be secured he would deliver said stock.

That after repeated demands on said Heath and
failure on his part to deliver said stock, this deponent
began action on transaction that he has failed herein
to recover the said stock, due personal services being
had on the said J. A. Heath.

That Efae A. Scott died September, 1910, that
Alex MacKenzie, the then husband of the said Effie
A. Scott, was appointed administrator of her estate
and that said shares of stock was taken inventory
as part of the said estate.

That thereafter to wit: on December 2nd, 1910,
the mortgage in question herein was made and
whereupon the said Heath obtained possession of
said stock, converted same to his use and later the
said judgment was rendered.

That on May 8th, 1911, the said Heath wrote the
administrator that as he only realized ten per cent,
on said stock, that the actual amount had on said
Ef&e A. Scott one-half interest was not large and that
he enclosed the sum of Fifty Dollars on account of
same. That this deponent has said original letter
which he knows to be in the handw^riting and to be
the letter and act of said J. A. Heath, and he tenders
same for the inspection of the Court and Council to
be filed if the Court shall direct.

That said J. A. Heath acknowledged to this de-
ponent repeatedly that said Efde A. Scott was the

82 The Pacific State Bank

owner of said stock and therefore was not questioned.

CHARLES E. MILLER.

Subscribed and sworn to before me this day,
August 12, 1912.

R. W. JAMIESON,
Deputy Clerk. [80]

EXHIBIT ''A."

This agreement made this first day of May, 1908,
between J. A. Heath, party of the first part, and Effie
A. Scott, party of the second part, witnesseth :

The party of the first part for the sum of one dol-
lar and other valuable consideration sells to party of
the second part and undivided half interest in forty
shares of the capital stock of the Raymond Box Com-
pany under the following conditions:

First: Party of first part reserves the right to
vote all shares of stock at any of the meetings of the
Company.

Second: The said stock to be not transferable.

Third : The stock to be turned over in the regular
way he certificate by party of first part, to parties of
first and second parts as soon as the present certifi-
cates are released from bank where same are held as
security for a loan to the Raj^nond Box Company.
(Signed) J. A. HEATH,

EEEIE A. SCOTT.

And the letter of J. A. Heath, dated May 8, 1911,
marked "Exhibit No. 2," to wit:

vs. A. S. Coats. 83

[EXHIBIT NO. 2.]

[Letter Dated May 8, 1911, from J. A. Heath to "Dear
Friend Alex."]

"Vancouver, May 8th, 1911.
Dear Friend Alex :

I received your letter in due time but have been
very slow answering. I am glad to know that you
have got through with the main part of the trouble
in getting the affairs of the estate settled. I got a
few lines from Stanley and he was saying he had
been paying a visit to his Aunt Ida and he was tell-
ing me how many little chickens she had. I am just
leaving her for Seattle where I will be staying for a
few days and I am then going to Portland for a week
and from there to San Francisco where I expect to
remain till about the 10th of June and will then re-
turn to Vancouver. You will understand Alex that
in selling out the Raymond business we had lost so
much money during the depression that we only real-
ized 10% on the stock, so the amount actually due on
Effie's half interest was not very large but all the
same Alex I shall continue making payments beyond
the time same is settled and have decided to com-
mence by sending the sum of Fifty Dollars on ac-
count of same and will continue paying said sum
every six months with interest from this date, [81]
and will enclose a draft in this letter for this amount.
I want also to express my apreciation to you of how
good you have been in this matter. I used to tell
Effie many a time that I felt like taking off my hat
to you for your goodness and untiring patience in
every matter where she was concerned, and I assure
you I feel the same now. You may tell Stanley

84 The Pacific State Bank

while I am in San Francisco I shall look up if possi-
ble a better printing press for him for I know he
feels very much interested in the printing business
and I think if he had a better one he would make
quite a little money on the side from that source,
beside being a pleasure to him. I wish you would
write me to Portland and tell me all the news — what
the Box Factory are doing at this time and what they
intend turning the place into. I feel interested in
knowing if same will be made into a veneer plant.
Give my respects to all the folks— Stanlev and your-
self.

Yours truly,

J. A. HEATH.
You can address General Delivery — Portland or
San Francisco."

The Court declined to permit the same to be filed,
read in e\ddence or to be considered, whereupon it
was

OEDERED that leave to amend be and it is
granted to the Pacific State Bank; that the proposed

amendment to the petition filed herein on the

day of August, 1912, stand as the amendment to said
petition, and the offer of the attorney for the trustee
to introduce his affidavit, dated August 12, 1912, and
the letter of J. A. Heath to the administrator of the
estate of Effie MacKenzie, not being germane to the
motion before the Court, it is denied, to all of which
the attorney for the trustee excepts and his excep-
tion is allowed.

Dated this 12th day of August, 1912.

EDWARD E. CUSHMAN,
. , , Judge.

vs. A. S. Coats. 85

[Endorsed] : "Filed U. S. District Court, Western
District of Washington. Aug. 13, 1912. A. W. En-
gle, Clerk. R. W. Jamieson, Deputy. [82]

[Order of Referee Granting Petition of Pacific State
Bank for Leave to Foreclose Mortgage in Proper
Court Having Jurisdiction Thereof, and to Make
Trustee a Party, etc.]

Order of Referee Denying Leave to Foreclose Mort-
gage.

This matter having come on for hearing on the or-
der to show cause why the petition of the Pacific
State Bank for leave to foreclose its mortgage
claimed by it on the real and personal property of
the bankrupt, which said mortgage is specifically set
out in said petition should not be granted, the peti-
tioner appearing by H. W. B. Hewen and Hayden
& Langhorne, its attorneys, the trustee appearing by
Charles E. Miller, his attorney, and numerous cred-
itors appearing by Welsh & Welsh, their attorneys,
the Court having permitted said creditors to inter-
vene and file their answer to said petition herein.
The Referee in Bankruptcy being duly advised in the
premises, and it appearing to the Referee that the
return of the trustee and the answer of said credit-
ors makes certain allegations intended to question
the validity of the said mortgage upon grounds spe-
cifically set out in said return and said answer, and
the Court being of the opinion that such questions
ought not to be determined by this Court at this time,
and in a summary proceeding, and in this proceed-
ing, but if questions as to the validity of said mort-

86 The Pacific State Bank

gage exist, such questions are proper as a matter of
defense in any proceeding which, may be begun for
the foreclosure of said mortgage, and the Referee
therefore grants the petition of the Pacific State
Bank for leave to foreclose said mortgage in the
proper court having jurisdiction thereof, and to
make the trustee in bankruptcy herein a party, and
directs the trustee in bankruptcy to enter his appear-
ance in the way of defense, or by [82a] interven-
tion as he may be advised is proper, in any such
proceeding, to which order and ruling of the Court,
the trustee, by his attorney, Charles E. Miller, and
the creditors who filed their return herein by theif
attorneys, Welsh & Welsh, duly excepts, asks for a
certificate from the referee to the Judge for the rea-
son that they contend that the Referee should at this
time determine whether or not said mortgage was a
valid mortgage, and if he should determine it was not
a valid mortgage, that he should then refuse to grant
permission to the Pacific State Bank to foreclose
said mortgage.

Done in open court this 19th day of April, 1912.
WARREN A. WORDEN,
Referee in Bankruptcy.

[Endorsed]: "Filed on this 19th day of April,
1912. Warren A. Worden, Referee in Bankruptcy. ' '
[82b]

Stipulation of Facts.
It is agreed between the parties hereto for the pur-
poses of appeal as follows, to wit :

That the bankrupt is justly and truly indebted to

vs. A. S. Coats. 87

the Pacific State Bank in the sum evidenced by the
note hereinafter described ; that the consideration of
said debt is money loaned by said bank to the bank-
rupt ; that there was on March 18, 1912, due on the
note evidencing such indebtedness the sum of
$22,351.71, with interest from October 1, 1911, at
eight per cent per annum, no part of which has been
paid, and the same was and is long past due and
owing ; that the original note was duly filed with the
claim of the said bank and withdrawn by the order of
Court, and that the copy thereof now attached to the
claim is a true and litei^al copy of the original note ;
that the copy of the instrument claimed by the Pa-
cific State Bank to constitute a mortgage, certified
by the auditor of Pacific County under date of March
23, 1912, and filed in this court July 26, 1912 (after
the petition for review of the order of the Referee
in Bankruptcy had been served and filed), is a true
and literal copy of the original instrument of which
it purports to be a copy ; that at the time of the exe-
cution and delivery of said instrument, to wit, De-
cember 2, 1910, J. A. Heath, who executed the same
as president of the corporation, and Miles H. Leach,
who executed the same as secretary thereof, were re-
spectively president and secretary of said corpora-
tion ; that the evidence as to whether the said presi-
dent and secretary were the sole trustees of said
corporation and were the owners of all the capital
stock thereof consists of the affidavit of Miles H.
Leach, and the findings and judgment of the Supe-
rior Court of the county of Pacific in the case of Alex
McKenzie, administrator, vs. J. Albert Heath; that

88 The Pacific State Bank

the corporate seal attached to said instiniment was
and is the [83] authorized corporate seal of the
bankrupt and was affixed to said instrument by the
secretary, as secretary thereof; that the said instru-
ment was filed for record in the office of the auditor
of Pacific County, Washington, in which the prop-
erty described in said mortgage is situated, on the
8th day of December, 1910, at 1 :15 o'clock P. M. and
recorded in Book 30 of mortgage records, at page 31,
and was also filed on the same date as a chattel mort-
gage in the same office but not recorded as such.

IT IS FURTHER AGREED that the Pacific State
Bank, petitioner and claimant, and the Raymond
Box Company, bankrupt, are corporations organized
under the laws of Washington.

IT IS FURTHER AGREED that the value of the
real and personal property described in said instru-
ment claimed to be a mortgage is approximately and
does not exceed Tv^enty Thousand ($20,000) Dollars.

IT IS FURTHER AGREED that subsequent to
the stipulation heretofore filed and dated April 24,
1912, the petitioner, the Pacific State Bank, has
duly filed its claim for the indebtedness due it as a
preferred claim, based upon said instrument claimed
by it to constitute a mortgage.

IT IS FURTHER AGREED that the bankrupt is
indebted in the sum of about Fourteen Thousand
($14,000) Dollars, to creditors other than the Pacific
State Bank, and that all of said creditors became
such subsequent to the execution of said instrument
claimed to constitute a mortgage, and prior to the
adjudication in bankruptcy, and the following cred-

vs. A. S. Coats. 89

itors had no actual knowledge of the fact of said al-
leged mortgage prior to the time the bankrupt be-
came indebted to them, to wit: Raymond Foundry
& Machinery Company, Siler Mill Company, Willa/m
Lumber Co., W. W. D. Wood Company, Pearce
Brothers and T. H. Bell. [84]

IT IS FURTHER STIPULATED that at all times
prior to the filing of the petition by the Pacific State
Bank for leave to foreclose, and at all times since and
now the Trustee was and is in the full, actual and
manual possession of all of the property of the bank-
rupt described in the mortgage.

IT IS FURTHER STIPULATED that there shall
be incorporated as part of the record and transcript
on appeal in addition to this stipulation following
papers, to wit: 1st, the petition of the Pacific State
Bank for the leave to foreclose, the return of the
trustee, the return of certain unsecured creditors and
the replications of the bank; 2d, the affidavit of M.
H. or Miles H. Leach as to who were stockholders,
etc.; 3d, findings and judgment of the Superior Court
of the Pacific Company in the case of McKenzie vs.
Heath; 4th, the motion of the petitioner of the Pa-
cific State Bank for leave to amend and order per-
mitting amendment; 5th, the stipulation dated July
25th, 1912; 6th, the copy of the mortgage and note
of the instrument claimed by the Pacific State Bank
to be a mortgage and the note of the Pacific State
Bank filed July 26th, 1912; 7th, the proof of claim
of the Pacific State Bank; 8th, this stipulation; 9th,
the order or judgment of the Court; 10th, the pro-
ceedings for the taking of the appeal and the perfec-

90 The Pacific State Bank

tion thereof. It is also agreed that both parties
have taken exceptions for all rulings hostile to them.
IT IS AGREED that the record so made up will
be sufficient for review and will contain that [85]
portion of the record necessary to the hearing in the
Circuit Court of Appeals, but this stipulation shall
not conclude either of the parties if, in the opinion of
such parties it is necessary to cause to be certified
as a part of the transcript or subsequent thereto any
other portion of the evidence or the record.
Dated this 24th day of August, 1912.
CHAS. E. MILLER,

Attorney focr Trustee.
H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for Pacific State Bank.
WELSH & WELSH,
Attorneys for Unsecured Creditors.
[Endorsed]: "Filed U. S. District Court, Western
District of Washington. Aug. 27, 1912. A. W.
Engle, Clerk. R. W. Jamieson, Deputy." [86]

Order [Making Certain Additional Papers a Part of
the Record, etc.].

On the application of the Pacific State Bank for
an order making a part of the record various papers,
affidavits and other instruments introduced in evi-
dence before the Referee in Bankruptcy and by him
transmitted for consideration in connection with the
petition for review of the order of the referee in the
matter of the petition of the Pacific State Bank for

vs. A. S. Coats. 91

leave to foreclose its mortgage, said papers, affida-
vits and other instruments having been heretofore
considered by the Court in a determination of the va-
lidity of the mortgage claimed by the Pacific State

Bank,

IT IS ORDERED that the following papers, in
addition to the papers already a part of the record
herein, shall be and are hereby made a part of the
record in this cause, to wit: The petition of the Pa-
cific State Bank for leave to foreclose its mortgage,
the return of the trustee thereto, the answer of cer-
tain unsecured creditors thereto, the replication of
the Pacific State Bank, the affidavits of the follow^
ing: F. C. Lewis, and C. W. Reed, I. W. Homan, Er-
nest F. Rhodes, J. W. Kleeb, Joseph G. Heim, H. W.
B. Hewen, Miles H. Leach, dated April 16, 1912, E.
E. Case and F. R. Brown, M. E. Riley, Neal Stupp.
Also a certified copy of the findings and judgment
of the Superior Court of the State of Washington for
Pacific County in the cause of Alex McKenzie, ad-
ministrator of the estate of F. A McKenzie, de-
ceased, against J. Albert Heath.

Also the stipulation between the attorney for the
trustee and the attorneys for the Pacific State Bank,
dated July 22, 1912. Also the stipulation between
said parties and Welch & Welch, attorneys for unse-
cured creditors, dated April 24, [87] 1912, and the
stipulation between the same parties dated August
24, 1912. Also the copy of the instrument claimed
by the Pacific State Bank to constitute a mortgage
certified by the Auditor of the Pacific County and
filed herein on the 26th day of July, 1912. Also the

92 The Pacific State Bank

proof of claim of the Pacific State Bank filed in the
office of the clerk, Jnly 36, 1912. Also the affidavits
attached to the return of the trustees, to wit: Exhibit
''A." -B," -0," -D," -E," -F," ^^G," and -H."
Any of said instruments not already marked ''filed"
are directed to be filed by the clerk and so marked.

Bated this 27th day of August, 1912.

EDWARD E. CUSHMAN,

Judge.

[Endorsed]: "Piled U. S. District Court, Western
District of Washington. Aug. 27, 1912. A. W.
Engle, Clerk. R. W. Jamieson, Deputy." [88]

Memorandum Decision In Re Mortgage Owned by
the Pacific State Bank. ■

By reference to the papers on file I find that on the
5th day of April, 1912, the referee having charge of
the proceedings in this case made an order based
upon a petition presented to him by the Pacific State
Bank, a corporation of the State of Washington di-
recting the trustee of the bankrupt's estate to show
cause on a specified date why said corporation (here-
inafter for convenience designated as "The Bank")
should not be granted leave to foreclose a mortgage
covering real and personal property constituting the
manufacturing plant of the bankrupt corporation,
alleging the same to be the first mortgage and a prior
lien upon all of said property and to join the trustee
as a party defendant in such foreclosure suit, in any
court having jurisdiction. Responding to said show
cause order, the trustee, on the 19th day of April,
1912, made a return in writing opposing the petition

vs, A. S. Coats, 93

and containing allegations contesting the validity of
the mortgage. A large number of creditors of the
bankrupt also filed an answer to said petition in op-
position to the granting of leave to foreclose said
mortgage, traversing the material allegations of the
petition and pleading affirmatively their rights as
creditors and matters of fact and law constituting
grounds for holding the mortgage to be void in law
and equity. The Bank filed replications to the re-
turn of the trustee and to the answer of the credit-
ors. The controversy as set forth in the pleadings
above enumerated was heard by the referee on the
19th day of April, 1912, and thereupon he made an
order granting The Bank leave to foreclose said
mortgage in the proper court having jurisdiction
thereof and to make the trustee a party, and by vir-
tue of that order The Bank [89] claimed the right
to institute a foreclosure suit in the Superior Court
for the State of Washington. Exceptions were
taken to the order granting leave and upon a peti-
tion for review of the referee's decision he certified
the case to the court. On May 16th, 1912, by a stipu-
lation signed by attorneys representing the trustee,
unsecured creditors and The Bank, the following
facts were admitted:

"That the petitioner, Pacific State Bank, has
not, at any time, filed its claim or any claim for
the indebtedness represented by the note and
mortgage described in its said petition.

That at the time the said petitioner. Pacific
State Bank filed its said petition for leave to
foreclose its said mortgage and at the time the

94 The Pacific State Bank

order to show cause thereon was issued the
trustee in the above-entitled matter was in the
full, actual and manual possession of all of the
propert}' of the bankrupt described in said mort-
gage.

That at the time the said petition was verified,
to wit, on March 18, 1912, there was due on the
said note the sum of $2'2,351.71, with interest
thereon from October 1, 1911, at eight per cent
per annum, no part of which had been paid, and
that the same was long past due and owing; and
that the copies of said note and mortgage filed
by the petitioner are true copies of the original
thereof."
In the administration of insolvent estates through
judicial proceedings, for the sake of economy and ex-
pedition, it is desirable that a single court should mar-
shal the assets, adjudicate conflicting claims and de-
termine the priorities between competing creditors,
lien claimants and all parties asserting rights with
respect to the res and distribute the funds to the par-
ties according to their rights in order that the admin-
istration may be complete and final. Therefore, it
is obvious that the proper court to adjudicate all
such matters and controversies must be the court
which first acquires legal custody of the res and
jurisdiction of the subject matter involved. 1 Love-
land on Bankruptcy (4th ed.), p. 107, sec. 31; 2 Love-
land on Bankruptcy (4th ed.), p. 1039-1040; Murphy
V. Hofman Co., 211 U. S. 562, 53 L. Ed. 327. By
[90] the stipulation above mentioned it appears
that this Court, through the trustee in bankruptcy.

vs. A. S. Coats. 95

did have legal custody of the mortgaged property
when The Bank presented its petition to the referee
asking leave to foreclose said mortgage, and by the
law this Court is vested with full jurisdiction to ad-
judicate all questions as to the validity of said mort-
gage and as to preferential claims and to sell the
property and apply the proceeds to the payment of
the mortgage debt, if it shall be adjudged to be a
valid lien upon all or any part of the property, and in
that manner to protect the rights of The Bank as
effectually as might be done by an ordinary fore-
closure proceeding in another court. And to avoid
vexatious complications with respect to expenses in-
cidental to the custody and preservation of the mort-
gaged property, it is for the advantage of all parties
to have the estate fully administered in the bank-
ruptcy proceedings. For these reasons I have here-
tofore made an oral announcement of the determina-
tion of the Court to set aside the order made by the
referee granting leave to foreclose the mortgage in
any other court and at the same time I directed at-
tention of counsel to the fact that The Bank had
failed to file its claim as a preferred creditor based
upon the mortgage, and requested them to consider
the question whether without such claim being filed
and without other pleadings the controversy could be
properly adjudicated. In response to my suggestion
The Bank through its attorneys has filed in this court
a verified proof of its claim as a secured creditor,
accompanied by a certified copy of the record of the
mortgage and a copy of the promissory note secured
thereby after exhibiting to the Court the original

96 The Pacific State Bank

note, and b}^ a stipulation signed by the attorney for
the trustee and attorney for The Bank the case has
been submitted to me for decision of the questions
affecting the validity of the mortgage. [91]

The validity of the mortgage is assailed on two
grounds, viz.: 1. There is no record evidence of au-
thority conferred by the board of trustees of the
mortgagor to encumber this property by a mortgage ;
2. The mortgage is void upon its face because the
certificate of acknowledgment lacks the essentials of
validity prescribed by a statute of this state, to wit:
an act entitled: "An Act providing the form and con-
tents of acknowledgments of corporations to instru-
ments executed and acknowledged by corporations."
Laws of Wash. 1903, 245.

The mortgagor is a Washington corporation and
its powers must be exercised conformably to the laws
of this State, and to sustain his contention the
trustee of the bankrupt estate relies upon a statute
of the State prescribing that: "The powers of cor-
porations must be exercised by a board of not less
than two trustees who must be stockholders of the
company." Eem. &' Ball. Codes of Wash., sec. 3686;
Pierce's Code, 1905, sec. 7059, and the statute above
cited prescribing the essentials of a valid certificate
of acknowledgment by which the execution of a deed
or mortgage by a corporation must be authenticated,
the statutory requisites being as follows: The officer
to whom the acknowledgment is made must certify
(a) that the person assuming to execute an instru-
ment as the act and deed of corporation requiring an
acknowledgment, must certify that such person is

vs. A. S. Coats. 97

known to him to be the president, vice-president,
secretary, treasurer, or other authorized officer or
agent, as the case may be, of the corporation that
executed such instrument; (b) that such officer or
agent acknowledged the said instrument to be the
free and vohmtaiy act and deed of said corporation,
for the uses and purposes therein mentioned; (c) and
on oath stated that he was authorized to execute said
instrument; (d) and that the seal affixed is the cor-
porate [92] board of trustees as an organized
body, the execution of the mortgage was authorized.
The mere assent of the members of the board sep-
arate and apart is not equivalent to action by the
board or the corporation as an entity, and without
evidence of such action the Court is not authorized
to presume that the corporation did in fact encum-
ber its working plant and all of its substantial assets.

7 Am. & Eng. Enc. of Law (2d ed.), 701;

3 Washburn on Real Property (4th ed.), 262.
The certificate of acknowledgment is of the follow-
ing tenor:

"State of Washington,
County of Pacific, — ss.

Be it remembered that on this 2nd day of De-
cember, 1910, before me, the undersigned, a no-
tary public in and for the State of Washington,
personally appeared the within named J. A.
Heath and Miles H. Leach, each to me well
known to be the identical persons above named
and whose names are subscribed to the within
and foregoing instrument, the said J. A. Heath,
as President and the said Miles H. Leach, as

^8 The Pacific State Bank

Secretary of said corporation, and the said J. A.
Heath acknowledged to me then and there that
he as president of said corporation had affixed
said name together with his own name, freely
and voluntarily as his free act and deed and the
free act and deed of said corporation; and the
said Miles H. Leach also then and there ac-
knowledged to me that he as secretary of said
corporation had signed the aboye instrument as
secretary of said corporation by his free and
voluntary act and deed and the free and volun-
tary act and deed of the said corporation. Wit-
ness my hand and official seal.

[:N^tarial Seal] H. W. B. HEWEX,

Notary Public Residing at South Bend, Wash-
ington."

This does not meet the requirements of the statute.
It is sufficient because it does not certify that the
official character of the persons who made the ac-
knowledgment as officers of the corporation was
known to the certifying officers, and because it lacks
the required declaration on oath of said officers that
they ivere authorized to execute the instruynent , and
because it lacks the declaration on oath of said offi-
cers that the seal affixed was the seal of the corpora-
tion. These defects are glaring and the Court can-
not give effect to the mortgage as a valid [93] seal
of said corporation.

The statute of this State governing conveyances of
real property specifically provides that all convey-
ances of real estate or any interest therein and all
contracts creating or evidencing any encumbrance

vs. A. S. Coats. 99

upon real estate shall be by deed. A deed shall be
in writing, signed by the party bound thereby and
acknowledged by the party making it before some
person authorized by the laws of this state to take
the acknowledgment of deeds. Eem. & Ball. Code of
Wash., sec. 8745-6; Pierce's Code (1905), sec.
4435^6. The special act heretofore cited prescribes
the particular form of acknowledgment applicable to
instruments executed by corporations.

Instruments not acknowledged as required by
these statutes are void. Forester vs. Reliable Trans-
fer Co., 59 Wash. 86.

The mortgage which is the subject of this contro-
versy is dated December 2, 1910, and its validity or
invalidity must be adjudged conformably to these
statutes enacted in the exercise of legislative power
to regulate the conduct of corporations within the
^ate and the mode of conveying titles to property
and their observance is necessary in order to main-
tain confidence in the stability of recorded titles. ^

The introductory and concluding clauses of the in-
strument are as follows:

"THIS INDENTUEE made this 2nd day of
December, 1910, between the Eaymond^ Box
Companv, a corporation, organized and existing
under the laws of the State of Washington,
party of the first part and Pacific State Bank,
also a corporation organized and existing under
the laws of the State of Washington, party of

* -x- *

the second part

In witness whereof, the said party of the first
part has hereunto affixed its corporate seal and

100 The Pacific State Bank

these presents to be effected by its President and
Secretary with the authority of the Board of
Trustees."

And this is all that appears by the instrument it-
self or in the case to warrant an inference that by
any act of the [94] lien upon the bankrupt estate
contrary to the plainly expressed will of the legisla-
ture. To do so would be a judicial nullification of
a statute, the validity of which has not been ques-
tioned. Furthermore a decision giving effect to an
instrument creating a lien upon property in this
state lacking in formalities prescribed by the statutes
of the State, would be in opposition to decisions of
the Circuit Court of Appeals for the Ninth Circuit
upholding the principle that statutes prescribing the
mode of executing instruments required to be re-
corded as evidence of rights to property in this state,
are mandatory and that such instruments lacking the
prescribed solemnities are void.

Chilberg vs. Smith, 1T4 Fed. Rep. 805 ;

Mills vs. Smith, 177 Fed. Rep. 652 ;

In re Osborn, 196 Fed. Rep. 257.

It is useless to try to sustain this mortgage by dis-
puting the right of the trustee to contest it. Lack-
ing as it does a sufficient certificate of acknowledg-
ment it is impotent to create a lien, and the trustee
holds the title unencumbered by virtue of the bank-
ruptcy law. In re Osborn, 196 Fed. Rep. 257.

Authorities have been cited sustaining the right of
a mortgagee in possession of mortgaged property
and holding as security for a valid debt against
claims of other creditors having no lien and that such

vs. A. S, Coats. 101

nonlien creditors have no standing to contest the
mortgagee's rights, merely because the mortgage was
defective or void. In such a case the right to the
security is equivalent to the right of a pledgee be-
cause based upon actual possession, but in this case
the trustee, not The Bank, is in possession.

I lind among the papers an affidavit by Mr. Leach,
secretary of the bankrupt corporation, affirming the
facts omitted in the certificate of acknowledgment of
the mortgage and also [95] stating that at the
time of the execution of the mortgage, all of the stock
of the corporation was owned by himself and the
president of the corporation, who joined in execution
of the mortgage, and that himself and the president
were the only trustees of the corporation at that time.
I deem it sufficient to say in regard to this affidavit
that it cannot be regarded as a plea of estoppel nor
as competent evidence, either to sustain such a plea
or to cure the defective certificate of acknowledg-
ment.

For the reasons stated it is my opinion that this
mortgage is a void instrument and that the claim of
The Bank should be allowed only as an unsecured
claim, and the mortgage security rejected.

C. H. HANFORD,
Judge. [96]
[Addenda to Memorandiim Decision Re Mortgage.]

It has been made known to me that counsel for
The Bank are aggrieved by the brief and somewhat
abrupt treatment which the affidavit of Mr. Leach
received in the foregoing memorandum, and it is
necessary to make a more extended explanation of

102 The Pacific State Bank

my opinion in this case in order to avoid a misun-
derstanding wliich might be the basis for unfairly
criticising their conduct of the case. The manner in
which the case has been prepared and argued con-
vinces me that the work of counsel has been faith-
fully and intelligently performed, and that nothing
has been left undone which might lead me to a differ-
ent conclusion or decision of the case.

I wish to say further that in my study of the case
I did not fail to notice the im,portant facts that the
claim of The Bank is for a bona fide debt due and
owing to it by the 'bankrupt corporation ; that credit
was given by The Bank to the corporation in reliance
upon the instrument purporting to be a mortgage
which the parties thereto believed had been executed
with due formality and constituted a valid lien ; that
it is conceded by all the litigants in this case that said
instrument was in fact signed, sealed with the cor-
porate seal, acknowledged, certified, delivered and
recorded at the times and in the manner indicated by
the instrument itself and the endorsements thereon ;
and that the testificandum clause recites that its exe-
cution by its president and secretary was authorized
by the board of trustees. With these matters in
mind the Court must decide the question whether the
document itself, aided by a conclusive presumption
that it speaks the truth and tested by the rules of
law applicable thereto, proves its own validity. I
adhere to the opinion intended to be expressed in the
memorandum originally filed, that it is invalid and
impotent to create a lien. The defects apparent
upon an inspection [97] of the document are lack

vs. A. S. Coats. 103

of authority conferred by a corporate act to ex-
ecute a mortgage and lack of the statutory require-
ments in the certificate of acknowledgment. These
defects are not supplied and cannot be supplied T3y
any pleading or proof, or pleading and proof of the
matters stated in Mr. Leach's affidavit. The Court
cannot find, by reading the document nor by evi-
dence offered or suggested, that at any time there was
a kw^ully convened meeting of the board of trustees
at which action was taken by the board as an organ-
ized body conferring authority to execute a mort-
ffas-e. I do not mean to affirm that the minutes of
a meeting of the board of trustees would be the only
competent evidence to prove that such a meeting
was held or of the action taken, but to meet the objec-
tion urged against the validity of this mortgage on
the ground of lack of authority to execute the same,
as the document itself does not recite specifically the
time and manner of granting authority, some evi-
dence is necessary to prove affirmatively that the au-
thority was conferred by act of the board of trustees
as an organized body. The certificate of acknowl-
edgment is insufficient and the defects are not formal
but substantial as I have before stated, and this ob-
jection to the validity of the instrument cannot be
overcome by any evidence because the certificate it-
self is a substantial part of the mortgage. The mak-
ing of a certificate is an official act and the facts
required to be certified must be certified in accord-
ance with the requirements of law. In this case the
certificate is lacking and no substitute for it will meet
the exactions of the law. If in place of Mr. Leach's

104 The Pacific State Bank

affidavit the facts stated therein had been formally
pleaded as an estoppel, in bar of any attempt to con-
test the validity of the mortgage, and if the plea had
been supported by testimony taken according to the
usual course of procedure in introducing [98] evi-
dence in a suit in equity, and if such evidence were
uncontradicted or even confirmed by admissions of
the adverse party, the relative rights of the parties
to this controversy would not, in my opinion, be at
all changed.

The issue to be decided is whether the instrument
called a mortgage has any virtue as a legal contract
creating a valid lien upon the bankrupt's property.
Now to elaborate in detail the grounds of my decision
90 that, if possible, it shall not be misunderstood by
anyone, I will say, in addition to what has been said,
that there is a right way for corporations to exercise
their powers in dealing with property, and no other
way is right. When natural persons avail them-
selves of the supposed advantages of transacting
business through the medium of an artificially
created person, called a corporation, they should
keep in mind the important fact that their rights as
individuals with respect to the business conducted by,
or the property vested in, the corporation are not
merely merged in the artificial person. It must act
through its own agents and according to its organic
law. If Mr. Heath and Mr. Leach owned. the plant
of the Raymond Box Company, and conveyed the
title and possession of it to a third person named
John Smith, it would not be supposed that they could
afterwards create a valid lien upon the same prop-

vs. A. S. Coats. 105

erty by executing a mortgage, and it is the sense of
my decision that Mr. Heath and Mr. Leach could not,
by their act in executing a mortgage, create a valid
lien upon the plant when the title was fully vested
in the bankrupt corporation. The right way for a
coi'poration to execute its power to mortgage its
property is to have a formal meeting of its board of
trustees at such a time and place, and pursuant to
such a notice, as will enable all of the members to
be present, and at such meeting all or a quorum must
be present and act as a body and not [99] as in-
dividuals in the adoption of a resolution authorizing
the execution of the proposed mortgage, and then
the instrument should be written, signed, sealed and
acknowledged by officers or agents of the coipora-
tion authorized by it to act, and then the instrument
should have appended to it the certificate of acknowl-
edgment and sworn statement which the law specif-
ically requires. The formal meeting of the board
of trustees should be evidenced by a record kept of
the proceedings of the board of trustees and an in-
strument affecting the title to property should con-
tain a specific reference to the action of the board of
trustees conferring authority for its execution. It
is for lack of authority to execute the mortgage so
conferred and of a certificate of acknowledigment and
sworn statement conforming to the requirements of
a statute of this State that I hold the mortgage in
question to be void, and when I use the word "void"
I mean that it has not virtue to affect the legal title
of the corporation as a distinct entity. By force
and virtue of Section 70 of the Bankruptcy Law, and

106 The Pacific State Bank

Section 47 as amended, tlie unencumbered legal title
of the bankrupt corporation to the property in con-
troversy^'passed to and became vested in the trustee
and that legal title has been reinforced by his actual
manual possession of it, therefore, the trustee is not
in the situation of a nonlien creditor endeavoring to
pick flaws in a mortgage for the purpose of uncover-
ing property subject to execution. With respect to
the property he represents the legal owner and all of
the unsecured creditors. In that situation the mere
equitable rights of The Bank which might be as-
serted against the bankrupt corporation alone or its
stockholders, cannot prevail in this court. On this
proposition the decisions of the Circuit Court of Ap-
peals for the Ninth Circuit which has been cited are
[100] controlling and conclusive.

C. H. HANFORD,
Judge.
[Endorsed] : ''Filed U. S. District Court, Western
District of Washington. Jul. 31, 1912. E. W. Engle,
Clerk. E. W. Jamieson, Deputy." [101]

[Decree.]

This cause came on to be heard at this term upon
the exceptions made by the Trustee to the order of the
referee in bankruptcy and the petition for review of
the order of the referee in bankruptcy allowing fore-
closure of the mortgage of the Pacific State Bank in
the State court, and upon the subsequent stipulation
of the parties that the Court should determine the
validity of said mortgage, and upon the proofs made
and the agreed statement of facts filed in this court

vs. A. S. Coats. 107

on the 2!7th day of August, 1912 ; the trustee appear-
ing by Charles E. Miller, his attorney ; The Pacific
State Bank appearing by H. W. B. Hewen and Hay-
den & Langhome, its attorneys; the Court having
examined the evidence adduced before the referee in
bankruptcy, and having also examined the agreed
statement of facts, and being now duly advised in
the premises, it is

OBDERED, ADJUDGED and DECREED that
leave to foreclose said mortgage in the State court
be and it is denied, to which ruling attorneys for the ,
Bank except and their exception is allowed.

IT IS FURTHER ORDERED, ADJUDaED
and DECREED that said mortgage be and it is ad-
judged to be invalid and of no effect for want of a
proper acknowledgment, and for lack of authority ,
in the president and secretary to execute the same,
to which judgment the attorneys for the Bank except
and their exception is allowed.

IT IS FURTHER ORDERED, ADJUDGED
and DECREED that the claim of the Pacific State
Bank be allowed as a general claim, and its claim
for preference based upon its alleged [102] mort-
gage be and it is rejected, and so far as said claim
for a preference is rejected by this order, the at-
torneys for the Bank except and their exception is

allowed.

Dated this 20th day of September, 1912.

EDWARD E. CUSHMAN,

Judge.

O. K,— OHAS. E. MILLER,

Attorney for Trustee.

108 The Pacific State Bank

[Endorsed] : ''Filed U. S. District Court, Western
District of Washington. Sep. 20, 1912. Frank L.
Oi'osby, Clerk. F. M. Harsbberger, Deputy. " [lOa]

Assignment of Errors.

Comes now the Pacific State Bank, petitioner here-
in, and files the following assignment of errors upon
which it will rely upon the prosecution of its appeal
from the order and decree made by this honorable
Court on the 20th day of September, 1912, to wit:

1. The Court erred in adjudging that the mort-
gage of the petitioner, the Pacific State Bank, is in-
valid and of no effect.

2. The Court erred in adjudging that the mort-
gage of the petitioner, the Pacific State Bank, was in-
valid for want of a proper acknowledgment, and
erred in holding and adjudging that the said mort-
gage was not properly acknowledged.

3. The Court erred in adjudging that the mort-
gage of the petitioner, the Pacific State Bank, was
invalid and of no effect for lack of authority in the
President and Secretary to execute the same, and in
holding and adjudging that the President and Secre-
tary of the Raymond Box Company did not have au-
thority to execute said mortgage.

4. The Court erred in adjudging that the claim of
the Pacific State Bank for preference, based upon
its mortgage, be rejected.

5. The Court erred in entering its order of Sep-
tember 20, 1912, in favor of the trustee in bank-
ruptcy and against the petitioner.

vs. A. S. Coats. 109

In order that the foregoing assignment of errors
may be and appear of record, the petitioner, the Pa-
cific State Bank presents the same to the Court
and prays that such disposition may be made thereof,
as is in accordance with [104] the laws and stat-
utes of the United States in such cases made and pro-
vided, all of which is respectfully submitted.
H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for the Pacific State Bank, Petitioner.

[Endorsed] : ''Filed U. S. District Court, Western
District of Washington. Sep. 20, 1912. Frank L.
Crosby, Clerk. F. M. Harshberger, Deputy. ' ' [105]

In the District Court of the United States, for the
Western District of Washington, Southern Divi-
sion.

No. 1054.

In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Petition for Appeal.
To the Honorable E. E. CUSHMAN, Judge of the
Above-named Court, Presiding Therein:
The Pacific State Bank, petitioner herein, conceiv-
ing itself aggrieved by the order and decree made
and entered by the above-named court in the above-
entitled court, under date of September 20th, 1912,
wherein and whereby, among other things, it was and
is ordered and directed that the petition of the
Pacific State Bank for leave to foreclose its mortgage
in the State court be denied, and wherein the mort-

110 The Pacific State Bank

gage of the Pacific State Bank is adjudged to be
invalid, and of no effect for want of proper acknowl-
edgment, and for lack of authority in the president
and secretary to execute the same, and wherein the
claim of the Pacific State Bank for a preference,
based upoii its mortgage, be and is rejected, does
hereby appeal to the United States Circuit Court of
Appeals, for the Ninth Circuit, from said order and
decree, and particularly from that part thereof which
adjudges the Pacific State Bank's mortgage to be
invalid and of no effect, and which adjudges the said
mortgage invalid for want of a proper acknowledg-
ment and for lack of authority in the president
and secretary to execute the same, and also [106]
from that portion of said order and decree which
rejects the claim of the Pacific State Bank, based
upon its mortgage, for a preference for the reasons
set forth in the assignments of error w^hich is filed
herewith, and it prays that its petition for said
appeal may be allowed, and that a transcript of the
record, proceedings and papers upon which said
order is made, duly authenticated, may be sent to the
United States Circuit Court of Appeals for the Ninth
Circuit.

Dated this 20th day of September, 1912.
H. W. B. HEWEN,
HAYDEN & LANGHORNE,
Attorneys for the Pacific State Bank.

Order [Granting Petition on Appeal].

The foregoing petition on appeal is granted, and
the claim of appeal therein made is allowed.

vs. A. S. Coats. Ill

IT IS FURTHER ORDERED that the bond on
appeal be fixed at the sum of Five Hundred no/100
($500.00) Dollars.
Dated this 20th day of September, 1912.

EDWARD E. CUSHMAN,

District Judge.
[Endorsed]: "Filed U. S. District Court, Western
District of Washington. Sep. 20, 1912. Frank L.
Crosby, Clerk. F. M. Harshberger, Deputy. ' ' [107]

In the District Court of the United States, for the
Western District of Washington, Southern
Division.

No. 1054.

In the Matter of the RAYMOND BOX COMPANY,

Bankrupt.

Bond on Appeal.
KNOW ALL MEN BY THESE PRESENTS:

That we. The Pacific State Bank, a corporation or-
ganized under the laws of Washington, with its prin-
cipal place of business at South Bend, Pacific County,
Washington, as principal, and American Bonding
Company of Baltimore, Md., as surety, are held and
firmly bound unto A. S. Coats, trustee in bankruptcy
of the Raymond Box Company, bankrupt, and Pacific
Transportation Company, Raymond Transfer & Cold
Storage Company, Cram Lumber Company, Ray-
mond Foundry & Machine Company, Bell Brothers
Hardware Company, Siler Mill Company, Willapa
Lumber Company, W. W. Wood Company, Pierce
Brothers^ J.' E. Gardner, Standard Tow Boat Com-

112 The Pacific State Bank

pany, Case Shingle & Lumber Company, Quinault
Lumber Company, Lebam Mill & Timber Company,
Fern Creek Lumber Company, Gus Bacopolus, Mike
Daniel, Victor A'gren, Wm. A. Clerk, Jim Hamalas,
Gus Pansgas, Abe Taylor, F. H. Hesmer, L. E.
Owens, Miles H. Leach, John Chepas, E. M. Hatch,
Chas. Herman, Ethel Owens, J. A. Schultz, R. N.
Skinner, Strat Nelson, Joseph Hatch, H. F. Klim-
mer, L. H. Osborne, Jim Jamison, E. Norwick, Frank
Walan, James Argeris, Arthur Bailey, Frank Sholes,
Ben Vanderflow and Ed Leacock, and each of
[108] them in the full and just sum of Five Hun-
dred ($500.00) Dollars, to be paid to the said A. S.
Coats, as trustee aforesaid, and Pacific Transporta-
tion Company, Rajnnond Transfer & Cold Storage
Company, Cram Liunber Company, Raymond Foun-
dry & Machine Company, Bell Brothers Hardware
Company, Siler Mill Company, Willapa Lumber
Company, W. W. Wood Company, Pierce Brothers,
J. E. Gardner, Standard Tow^ Boat Company, Case
Shingle & Lumber Company, Quinault Lumber Com-
pany, Lebam Mill & Timber Company, Fern Creek
Lumber Company, Gus Bacopolus, Mike Daniel, Vic-
tor Agren, Wm. A. Clark, Jim Hamalas, Gus Pans-
gas, Abe Taylor, F. H. Hesmer, L. E. Owens, Miles
H. Leach, John Chepas, E. M. Hatch, Chas. Herman,
Ethel Owens, J. A. Schultz, R. N. Skinner, Strat Nel-
son, Joseph Hatch, H. F. Klimmer, L. H. Osborne,
Jim Jamison, E. Norwick, Frank Walan, James Ar-
geris, Arthur Bailey, Frank Sholes, Ben Vanderflow
and Ed Leacock, their attorneys or assigns, for
which payment well and truly to be made we bind

vs. A. S. Coats. 113

ourselves, our representatives, successors and as-
signs jointly and severally firmly by these presents.

Sealed with our seal and dated this 20th day of
September, 1912.

WHEREAS, at a session of the District Court of
the United States, for the Western District of Wash-
ington, Southern Division, in a suit in bankruptcy
pending in said court, to wit: In the Matter of the
Raymond Box Companj^ Bankrupt, an order and
decree was rendered on the 20th day of September,
1912, wherein and whereby said Court did adjudge
a certain mortgage described in the petition of the
Pacific State Bank to be invalid and of no effect for
want of a proper acknowledgment and for lack of
authority in the [109] president and secretary to
execute the same, and the claim of the Pacific State
Bank for a preference, based upon said mortgage,
was rejected, and the Pacific State Bank having
obtained from said Court an order allowing an appeal
to the United States Circuit Court of Appeals for the
Ninth Circuit to reverse said decree and order, and a
citation directed to the said A. S. Coats, Pacific
Transportation Company, Raymond Transfer & Cold
Storage Company, Cram Lumber Company, Ray-
mond Foundry & Machine Company, Bell Brothers
Hardware Company, Siler Mill Company, Willapa
Lumber Company, W. W. Wood Company, Pierce
Brothers, J. E. Gardner, Standard Tow Boat Com-
pany, Case Shingle & Lumber Company, Quinault
Lumber Company, Lebam Mill & Timber Company,
Fern Creek Lumber Company, Gus Bacopolus, Mike
Daniel, Victor Agren, Wm. A. Clark, Jim Hamalas,

114 The Pacific State Bank

Gus Pansgas, Abe Taylor, F. H. Hesmer, L. E.
Owens, Miles H. Leach, John Chepas, E. M. Hatch,
Chas. Herman, Ethel Owens, J. A. Schultz, R. N.
Skinner, Strat Nelson, Joseph Hatch, H. F. Klimmer,
L. H. Osborne, Jim Jamison, E. Norwick, Frank
Walan, James Argeris, Arthur Bailej^ Frank Sholes,
Ben Vanderflow and Ed Leacock, is about to be
issued citing and admonishing them to be and appear
in the United States Circuit Court of Appeals for
the Ninth Circuit, to be holden at San Francisco,
California.

NOW, THEREFORE, the condition of the above
obligation is such that if the said Pacific State Bank
shall prosecute its said appeal to effect, and shall an-
swer all damages and costs that may be awarded
against it, if it fails to make its plea good, then the
above obligation to be [110] void, otherwise to re-
main in full force and. effect.

PACIFIC STATE BANK,

By JOSEPH O. HEIM, Pres., Principal.

AMERICAN BONDING COMPANY

OF BALTIMORE, MD.
By JOSEPH G. HEIM,

Local Vice-Pres., Surety.
[Seal] Attest: H. W. B. HEWEN,

Local Secretary.
Sufficiency of sureties on the foregoing bond
approved this 20th day of September, 1912.

EDWARD E. CUSHMAN,

Judge.

vs. A. S. Coats, 115

[Endorsed] : "Filed U. S. District Court, Western

District of Washington. Sep. 20, 1912. Frank L.

Crosby, Clerk. F. M. Harshberger, Deputy. ' ' [HI]

Certificate [of Clerk U. S. District Court to Record,

etc.].

United States of America,

Western District of Washington,— ss.

I, Frank L. Crosby, Clerk of the United States Dis-
trict Court for the Western District of Washington,
do hereby certify that the foregoing and attached
papers are a true and correct copy of the record and
proceedings in the case of In the Matter of Raymond
Box Company, Bankrupt, No. 1054, as required by
the stipulation of counsel filed in said cause, as the
originals thereof appear on file in said court, at the
City of Tacoma, in said District.

I do further certify that I hereto attach and here-
with transmit the original Citation, with acknowledg-
ment of service thereon;

And I further certify the cost of preparing and
certifying the foregoing record to be the sum of
Forty-six Dollars and ten cents ($46.10), which sum
has been paid to me by the attorneys for the appel-
lant herein.

IN WITNESS WHEEEOF, I have hereunto set
my hand and affixed the seal of said Court at the City
of Tacoma, in said District, this tenth day of October,

A. D. 1912.

[Seal] FRANK L. CROSBY,

Clerk.
By E. C. Ellington,
Deputy Clerk. [112]

116 The Pacific State Bank

[Endorsed]: No. 2193. United States Circuit
Court of Appeals for the Ninth Circuit. The Pacific
State Bank, a Corporation, Appellant, vs. A. S.
Coats, as Trustee in Bankruptcy of Raymond Box
Company, a Corporation, Bankrupt, et al., Appellees.
Transcript of Record. Upon Appeal from the
United States District Court for the Western Dis-
trict of Washington, Western Division.
Received October 14, 1912.

F. D. MONCKTON,
Clerk.
Filed October 16, 1912.

F. D. MONCKTON,
Clerk of the United States Circuit Court of Appeals
for the Ninth Circuit.

By Meredith Sawyer,
Deputy Clerk.

In the United States Circuit Court of Appeals, for the
Ninth Circuit.

No. 1054.

In the Matter of the RAYMOND BOX COMPANY,
Bankrupt.

Citation.

United States of America, — ss.

The President of the United States to A. S. Coats,
as Trustee in Bankruptcy of Raymond Box
Company, and to Pacific Transportation Com-
pany, Raymond Transfer & Cold Storage
Company, Cram Lumber Company, Raymond

vs. A. S. Coats. 117

Foundry & Machine Company, Bell Brothers
Hardware Company, Slier Mill Company, Wil-
lapa Lumber Company, W. W. Wood Company,
Pierce Brothers, J. E. Grardner, Standard Tow
Boat Company, Case Shingle & Lmnber Com-
pany, Quinault Lumber Company, Lebam Mill &
Lumber Company, Fern Creek Lumber Com-
pany, Gus Bacopolus, Mike Daniel, Vic-
tor Agren, Wm. A. Clark, Jim Hamalas, Grus
Pansgas, Abe Taylor, F. H. Hesmer, L. E. Owen,
Miles H. Leach, John Chepas, E. M. Hatch, Chas.
Hennan, Ethel Owens, J. A. Schultz, R. N. Skin-
ner, Strat Nelson, Joseph Hatch, H. F. Klimmer,
L. H. Osborne, Jim Jamison, E. Norwick. Frank
Walan, James Argeris, Arthur Bailey, Frank
Sholes, Ben Vanderflow and Ed. Leacock :
YOU ARE HEREBY cited and admonished to be
and appear at the United States Circuit Court of
Appeals for the Ninth Circuit to be holden at the city
of San Francisco, in the State of California, within
thirty (30) days from the date of this writ, pursuant
to an appeal filed in the office of the clerk of the Dis-
trict Court of the United States, for the Western
District of Washington, Southern Division, wherein
the Pacific State Bank is plaintiff and you are de-
fendants in error in a certain matter entitled
"In the Matter of the Raymond Box Company,
Bankrupt," to show cause, if any there be, why the
order and decree in said appeal mentioned should not
be corrected and speedy justice should not be done in
that behalf.
Witness the Honorable EDWARD E. CUSHMAN,

118 The Pacific State Bank

United States District Judge for the Western Dis-
trict of Washington, at Tacoma, in said District, this
23d day of September, A. D. 1912, as of September
20, 1912.

[Seal] EDWAKD E. CUSHMAN,

United States District Judge for the Western Dis-
trict of Washington, Residing at Tacoma, in Said
District.
Service of the foregoing citation is hereby accepted
this 25th day of September, 1912.

CHAS. E. MILLER,
Attorney for A. S. Coats, Trustee in Bankruptcy.

WELSH & WELSH,
Attorney for Pacific Transportation Co., Ra\Tnond
Transfer & Cold Storage Co., Cram Lbr. Co.,
Raymond Foundry & Machine Co., Bell Bros.
Hardware Co., Siler Mill Co., Willapa Lbr. Co.,
W. W. Wood Co., Pierce Bros., J. E. Gardner,
Standard Tow Boat Co., Case Shingle & Lbr. Co.,
Quinault Lbr. Co., Lebam Mill & Lbr. Co., Fern
Creek Lbr. Co., Gus Bacopolus, Mike Daniel,
Victor Agren, Wm. A. Clark, Jim Hamalas, Gus
Pansgas, Abe Taylor, F. H. Hesmer, L. E. Owen,
Miles H. Leach, John Chepas, E. M. Hatch, Chas.
Herman, Ethel Owens, J. A. Schultz, R. N. Skin-
ner, Strat Nelson, Joseph Hatch, H. F. Klimmer,
L. H. Osborne, Jim Jamison, E. Norwick, Frank
Walan, James Argeris, Arthur Bailey, Frank
Sholes, Ben Vanderflow and Ed. Leacock.

vs. A. S. Coats. 119

[Endorsed] : In the United States Circuit Court of
Appeals for the Ninth Circuit. In the Matter of the
Raymond Box Company, Bankrupt. Citation. Filed
U. S. District Court, Western District of Washing-
ton. Sep. 28, 1912. Frank L. Crosby, Clerk. E.
C. Ellington, Deputy.

No. 2193. United States Circuit Court of Appeals
for the Ninth Circuit. Received Oct. 12, 1912. F. D.
Monckton, Clerk. FHed Oct. 16, 1912. F. D.
Monckton, Clerk.

IN THE

United States Circuit Court of Appeals

FOR THE NINTH CIRCUIT

The Pacific State Bank, a corpora- \
tion, J

Appellant J

^^- \ No.

A. S. CoATES, as trustee in Bankruptcy
of Raymond Box Company, a corpor-
ation, bankrujit,

Appellee.

STATEMENT OF CASE.

Tiie questions before this court arose out of the
application of the Pacific State Bank, appellant, ad-
dressed to the bankruptcy court below, for leave to
foreclose its mortgage. As appears by an inspection
of the petition, the application of The Pacific State
Bank was in the alternate, first asking leave to fore-
close in the State court, but if the court should be
of the opinion that such foreclosure should be in
the bankruptcy court, then asking that the amount
of the indebtedness be ascertained, its mortgage ad-
judged a valid mortgage lien, and the property sold
for the satisfaction thereof. (See Record, pages 2
to 17).

The referee in bankruptcy granted leave to
foreclose the mortgage in the State court mthout
considering any question of validity. The matter
was taken to the District Court for review and Judge

— 4—

Hanford aimounced orally that lie would reverse
the decision of the referee, but would not determine
any question of the validity of the mortgage unless
it would he agreed by the x^arties he should do so.
The bank then filed its claim as a preferred claim
and joined ^^dth the trustee in bankruptcy in a stip-
ulation that the Court should determine the validity
of the mortgage. Thereafter a decree was entered by
the Court den3dng leave to foreclose in the State
Court, and adjudging that the mortgage was invalid
and of no effect for want of proper acknowledgment
and for lack of authority in the president and secre-
tary to execute the same, but allowing the claim of
the Pacific State Bank as a general claim. (Record,
page 106).

There is no controversy of fact in^'olved in this
appeal. Both by the pleadings and by the stipula-
tion of the pariies (Record, page 86) every ques-
tion of fact is fully agreed upon and the decision of
Judge Hanford, and the order entered by Judge
Cushman pursuant thereto, were in the light of
these agreed facts.

The indebtedness from the bankrupt to the
petitioner amounts to $22,351.71, with interest from
October 1, 1911, at eight per cent per annum. To
secure that indebtedness, an instrument in form set
out on pages 18 to 24 of the record, was executed in
the name of the Ra^niiond Box Company by J. A.
Pleath, its president, attested by Miles H. Leach,
its secretary, with the genuine corporate seal of the
Raymond Box Company attached. (See answers,
Record, pages 29 and 46. Stipulation, 86). This

— D —

iiistrmneiit was verified as required by statute with
3-elatioii to chattel mortgages, and it was acknowl-
edged in the form set out on pages 22 and 23 of the
record, and hereinafter set out.

Tlie form of the acknowledgment (if not taken
in connection ^^ith the verification) did not contain
any oath. Heath, the president, and Leach, the sec-
retary, respectively, held such offices and were the
sole trustees and the sole stockholders of the corpor-
ation. (Affidavit of Leach, Record, page 68).
Prior to the execution of this instrument. Heath,
the president, had agreed to sell an undivided in-
terest in a portion of his stock, under an agreement
whereby he was to retain the voting power (Record,
page 82), but according to a judgment of the Super-
ior Court of Pacific Count}' Heath had, prior to
the execution of the mortgage herein, converted this
stock to his o^YTl use, and judgment was rendered
against him for its value in the sum of $2644.00.
(Record, pages 69 to 75).

There is no controversy in the record that, ex-
cepting as just above stated, Heath and Leach o^^^led
all of the stock of the company and were the only
trustees and officers thereof.

The lower Court was of the opinion that the
mortgage was invalid, first because it was not author-
ized, according to the record, by act of the Board of
Trustees as an organized body, and second, because
the acknowledgment was insufficient under the
Statute. (Opns. Rjecoi'd, 92 and following pages.
See particularly page 105).

It is undisputed that all of the creditors of the

-6-

bankrupt other than the Pacific State Bank, have
become such subsequent to the date of the mortgage.
(Record, 34 and 88).

ASSIGNMENT OF ERRORS.

1. The Court erred in adjudging that the mort-
gage of the petitioner, The Pacific State Bank, is
invalid and of no effect.

2. The Court erred in adjudging that the mort-
gage of the petitioner, the Pacific State Bank, was
invalid for want of a proper acknowledgment, and
erred in holding and adjudging that the said mort-
gage was not properly acknowledged.

3. The Court erred in adjudging that the mort-
gage of the petitioner, the Pacific State Bank, was
invalid and of no effect for lack of authorit}^ in the
President and Secretary to execute the same, and in
holding and adjudging that the President and Sec-
retary of the Raymond Box Company did not have
authority to execute said mortgage.

4. The Court erred in adjudging that the claim
of the Pacific State Bank for preference, based upon
its mortgage, be rejected.

5. The Court erred in entering its order of
September 20, 1912, in favor of the trustee in bank-
ruptcy and against the petitioner.

ARGUMENT.

The opinion of the trial court and the judgment
show that there were two grounds on which the mort-
gage was held invalid ; first, that there was a lack of
authority in the officers who executed the instrument
on behalf of the corporation; and second, that the

— 7—

acknowledgment was fatally defective, and therefore
the mortgage was invalid.

The assignments of error must almost necessar-
ily be discussed together. For the purpose of mak-
ing clear the argimient to sustain our position, we
propose to discuss the questions arising under the
following heads, to-wit:

I.
ALLEGED LACK OF AUTHOEITY.
It is midisputed that the officers signing on be-
half of the corporation are respectively president
and secretary, and the only trustees of the company,
and that the seal attached is the corporate seal. (Rec-
ord, pages 30, 46, 82V Also that the instrument
itself recites that the act of the officers is by authority
of the Board of Trustees. (Record, pages 23, 87).
It is also undisputed that the two men who
signed as president and secretary are all of the stock-
holders of record in'the company (Record, page 68) ;
and that the mortgage was made to secure a bona
fide debt. (Record, page 82 and page 103).

Under these circumstances we are inclined to
venture the assertion that there is no repoii:ed case
which holds that an instiimient of this kind is in-
valid for lack of corporate authority.

In Cook on Corporations, 6th Ed., Sec. 722, it

is stated:

"When proof is given that an instru-
ment was signed by the corporate officers,
and that the seal attached is the corporate
seal, the courts will presume that the seal

was affixed by jDroper autliorit}^ and that
the execution was duly authorized, but this
presumption ma}^ be overthrown by proof
that the seal was affixed ^^dthout proper
authority from the Iward of directors or
some other duly authorized corporate
agenc3\"

This statement we belieye to ]3e elementary law.

In the case of Milton vs. Crawford, 65 AVash.,
152, the following language is used :

''It is claimed that there is nothing in
the abstract to show that Pratt and Rich-
ard, who executed the deed to Stuht, Craw-
ford's grantor, as president and secretary
of the coi-poration, were authorized to do
so either by resolution of the trustees or
by the by-laAvs of the corporation. The of-
ficers who executed the deed as the act of
the coi-poration were the appropriate of-
ficers. The instrument was authenticated
by the seal of the corporation. Under such
circumstances, the law presumes tliat the
conyeyance was authorized, and it was not
necessar}" to produce further evidence to
make a prima facie showing of authority.
" 'A very extensiye principle in the law
of coi^3orations applica]:»le to every kind
of written contract executed ostensibl_y hy
the corporation, and to ever}^ kind of act
done by its officers and agents in its behalf,
is that, where the officer or agent is the ap-

-9—

propriate officer or agent to execute a con-
tract, or to do an act of a particular kind,
in behalf of the corporation, the law pre-
sumes a precedent authorization, regularly
and rightfull.y made, and it is not necessary
to produce evidence of such authority from
the records of the corporation. Under the
operation of this principle, a deed or mort-
gage, purporting to have been executed by
a corporation, which is signed and acknowl-
edged in its behalf by its president and sec-
retary, will be presumed to have been exe-
cuted by its authority. So proof of the signa-
tures of the officers of a coiporation to a re-
lease under seed purporting to have been exe-
cuted by the corporation, is prima facie evi-
dence of its due execution. So where an
undertaking on appeal, purporting to have
been executed by the corporation as surety
was signed by its second vice-president and
its assistant secretary, with the coi-porate
seal affixed, the authority of the officers to
execute the instrument was presumed in ab-
sence of evidence to the contrary. 4 Thomp-
son Corp. (1st Ed.) Sec. 5029.'

''See also: Gorder vs. Plattsmouth Cabi-
ning Co., 36 Neb., 548; 54 N. W., 830; Whit-
ney vs. Union Trust Co., 65 N. Y., 576;
Hiitchins vs. Byrnes, 9 Gray, 367; Murphy
vs. Welch, 128 Mass., ^d,^-, Hamilton vs. Mc-
Laughlin, 145 Mass., 20; 12 N. E., 424; Mor-
ris vs. Keil, 20 Minn, 531; Yanish vs. Pio-
neer Fnel Co., 64 Minn., 175; 66 N. AY., 198;

-10-

Watkins vs. Glas, 5 Cal. App., 68; 89 Pac,

840."

See also Clark & Marshall on Corporations, Vol.
4, page 212.

By a long line of decisions, the Supreme Court
of the State of Washington has followed the general
rule stated in the text books cited alcove.

The result of the cases in this state, as well as
elsewhere, is that where^'er the corporation has re-
ceived the benefit of a transaction, or wherever it
has permitted its officers generalh^ to execute in-
struments, wliiatever they may be, or to transact
business mthout specific authority from the board,
or wherever all of the stockholders of the coiporation
have knowledge of the transaction and have not
seasonably objected, the company itself is estopped
to set up the invalidity of the act.

Bo7j vs. Scoff, 11 Wash., 399.
Dexter-Horton Co., vs. Long, 2 Wash., 435.
Leslie vs. Wilshire, 6 Wash., 282.

Kiru'in vs. Wasliingfon Mafcli Co., 37
Wash., 285.

West Seattle Land & Imp. Co., vs. Novelty
Mill Co., 31 Wash., 435.

Atlantic Trust Co. vs. Belirencl, 15 Wash.,
466.

Parker vs. Hill, 68 Wash., (op.) 146.
In the light of these cases, it is illmninative to
read the following taken from the supplemental
opinion of the trial judge:

"In my study of the case I did not
fail to notice the important fact that the

-11-

claim of the baiik is for a Ijona fide debt, due
and owing to it by the ])ankrupt corpora-
tion; that credit was given by the bank to
the corporation in reliance upon the instru-
ment pui^Dorting to be a mortgage which
the parties thereto believed had been
executed with due f omiality and constituted
a valid lien; that it is conceded by all the
litigants in this case that said instrument
was in fact signed, sealed with the corporate
seal, acknowledged, certified, delivered and
recorded at the times and in the manner in-
dicated hy the instrument itself and the en-
dorsements thereon; and that the testifican-
dum clause recites that its execution by its
president and secretary was authorized by
the Board of Trustees."

The aifidavit of Leach (Transcript, page 68)
shows that the men who executed the instrument
were not only the president and secretary, respect-
ively, but were the sole trustees and sole stockholders
of the company making the mortgage. Reference
mil doubtless be made by the appellees to the find-
ing of facts, conclusions and judgment in the Mac-
Kenzie case (Record, pages 69 and 73), and we deem
it proper briefly to call the attention of the court to
those findings and the judgment predicated thereon.
In the first place, it will be noted that the Raymond
Box Company was not a part\^ to or bound by the
judgment, and there is nothing in the findings or
judgment which disputes the affidavit of Mr. Leach,
showing that the only stockholders of record were

-12-

Leacli and Heath. On the contrary, the findings
show that Heath ^Yas to retain the voting power of
the stock. The most that the findings and judg-
ment referred to show is that Heath made an agree-
ment to sell a part of his stock and lireached his
contract and converted the stock to his own use,
and MacKenzie's decedent became entitled to dam-
ages for the breach of the contract, and, in fact, was
awarded judgment therefor. It will be noted that
MacKenzie was not awarded the stock, or any in-
terest therein, hut icas aivarded a judgment because
Ms decedent did not get ivhat he contracted to get.
It is too clear for serious argimient thatMacKenzie 's
decedent was not entitled to au}^ of the rights of a
stockholder. Had there been a stockholder's meet-
ing to pass upon the mortgage in question, who
would have appeared to represent the stock which
stood in the name of Heath? Obviously, Heath
would have appeared. It may be true that Heath
had not acquired or retained his stock honestly, but
the company knew nothing about that. The com-
pany only knew Mr. Heath. It did not know Mac-
Kenzie's decedent. Even if Heath had not breached
his contract, yet he was to have his voting power.
Therefore, Heath would ha^'e voted. But while he
did not vote, so far as the record shows, upon this
question, yet under the autliorities from the be-
ginning of corporation law down to the present time
and in all the states, including the State of Wash-
ington, where this corporation is organized and ex-
ists and where the property is located, the Heath
stock was concluded on the principle of estoppel, b,y

-13-

tlie action of Heath in participating in the execution
of the mortgage and the expenditure of the monej^
secured thereby.

If it is true, under the facts found by the trial
judge and admitted ])y all parties, that an instru-
ment executed l\v the sole officers, sole trustees and
sole stockholders of the corporation is invalid be-
cause the gentlemen who held these various positions
did not pass a formal resolution, then we are led to
conclude that the administration of the law has
reached such a point of technicality that business
men should never take any step, except under the
advice, direction and personal knowledge of a cor-
poration lawyer. The opinion of the trial judge in
its last analysis on this branch of the case holds
that the board of trustees must not only meet as a
board, luit they must meet formally and not inform-
ally, because the record in this case shows in a con-
vincing manner that the board did, in point of fact,
meet and did resolve to execute, though perhaps
informally, and did execute the instrument in ques-
tion. The certificate of the notary public made
under his notarial seal sliows that the president and
the secretary executed and acknowledged it. The
affidavit of the president and secretary is one affi-
davit, not two affidavits, and it would be strange
construction for the court to presume, in order to
destroy the validity of the instrument, that these
things were done separately and not together, and
unless they were done separately the board must
have been in session as a board.

It is too well settled to require any authority,

-14-

or more than a suggestion, that the minutes of the
meeting of the board of trustees or other body are
not the onl_y evidence of the action of the board, and
we believe that even if the highly technical construc-
tion of the requirements for valid corporate action
adopted by the trial judge should be sustained, yet
the evidence in this case shows enough to create
the irresistable presumption that a corporate meet-
ing was in fact held.

The rule adopted by the trial judge in this re-
spect is opposed to what every court knows, as a
matter of common knowledge, is the well nigh uni-
versal practice of small corporations doing business
in this country. It is frequently stated in text books
and in opinions of courts, and in the discussion of
economic questions by students of such questions,
that the growth of small business corporations in
this country, which has so characterized the latter
years of the development of business in the country,
is accounted for by the great convenience of so do-
ing business. If it is tnie that two individuals
holding all of the stock, constituting the whole board
of trustees and holding all the offices of the corpor-
ation cannot bind the corporation without formally
calling a meeting to order, fonnally making a mo-
tion, formally adopting it and fonnally placing it
upon the minutes, then the couA-enience supposed to
be one of the strong characteristics of doing business
through the medium of a corporation is a myth.
Instead of a convenience, it is a pitfall, and a trap
to catch the unwary, and if the formalities thus re-
quired are insisted upon, it is the ver}^ antithesis of

-15-

coiiveuience ; it is a cumbersoine, imwieldly, inse-
cure and slow method of transacting the business
affairs of life.

Livieratos vs. Conniiouwealth, etc., Co., 57
Wash., (op.) 379-80.

II.
ALLEGED DEFECTIVE ACKNOWLEDG-
MENT.

(a) Assuming that the acknowledgment was
defective, the trustee in hankruptcij who represented
only creditors who hecame such subsequent to the
date of the mortgage, could not ohject to its validity
either as a real or a chattel mortgage.

The trial court held that the mortgage, even if
authorized, was invalid l^ecause not acknowledged
in accordance with the statute. The alleged invalid-
ity consists in the failure of the notary to certify
that the otficers were such officers and under oath
stated that they were authorized to execute the in-
strmiient and that the seal affixed was the seal of
the coii3oration. (Record, page 98). We think it
best to assume first, that the aclaiowledgment was
irregular, and to discuss the question whether so
assmning, the trustee in l^ankimptcy representing
only subsequent creditors can raise the question, and
thereafter to discuss the terms of the acknowledg-
ment itself.

Section 47a of the Federal Bankruptcy Statutes
as amended by 1910, pro^ddes that:

"Such trustee, as to all property in the
custody or coming into the custody of the

-16-

bankimptcy court shall be deemed vested
mtli all the rights, remedies and powers of
a creditor holding a lien by legal or equit-
able proceedings thereon, and also as to all
property not in the custody of the bank-
ruptcy court shall be deemed vested ^\dth all
the rights, remedies and powers of a judg-
meoat creditor holding an execution duly
returned unsatisfied."

It is settled that a trustee in bankruptcy has
the rights and only the rights which the creditors
whom he represents would have had, had not bank-
ruptcy intervened, and had the creditors reduced
their claims to judgment.

In re Bazemore, 189 Fed., 236.
Chilherg vs. Smith, 174 Fed., 806.
In re Nelson, 191 Fed., 233.

It is clear that Section 47a, set out above, was
not intended to create new rights in creditors, or
extend rights, but in legal effect was to preseiwe the
rights that creditors might have exercised against
the bankrupt, had not bankruptcy proceedings in-
tervened. If it is true that had the comjjany not
become bankrupt and had the existing creditors re-
duced their claims to judgment, the judgment would
still be inferior and subject to the mortgage of the
appellant, then it is true that the trustee in bank-
ruptcy who only represents the creditors has no bet-
ter position.

The statutes of this state regarding acknowledg-

-17-

meuts so far as applicable to this ease are found in
the following:

(Rew. c(' BaJ. Code, Sec. 8745).

"All conveyances of real estate or of
any interest therein, and all contracts creat-
ing or evidencing any encumbrance upon
real estate, shall be by deed."

{Bern, d' Bah Code, Sec. 8746).

"A deed shall be in writing, signed by
the party bound thereby, and acknowledged
by the party making it, before some person
authorized by the laws of this state to take
the acknowledgment of deeds."

{Bern. & Bah Code, Sec. 8759).

"The person or officer taking such ac-
knowledgment shall certify the same by a.
certificate written on or annexed to said
mortgage, deed or instrument, which certi-
ficate shall be under his official seal, if any
he has, and such certificate shall recite in
substance that the deed, mortgage or in-
strument was acknowledged by the pei*son
or persons whose name or names are signed
thereto as grantor or principal, before him
as such officer, Avith the date of such ac-
knowledgment. ' '

(Bern, and Bed. Code, Sec. 8761).

"A certificate of acknowledgment, sub-
stantially in the follo^ring fonn shall be
sufficient :

-18-

State of Washington, )
County of f ' ' *

I (here give name of officer and official

title) do hereby certify that on this

day of , 18..., personally ap-
peared before nie (name of grantor, and
if acknowledged by wife, her name, and add
''his wife"), to me knoA^^i to be the individ-
ual or individuals described in and who exe-
cuted the within instrument, and acknowl-
edged that he (she or they) signed and
sealed the same as his (lier or their)
free and voluntary act and deed, for the
uses and purposes therein mentioned.

Given under my hand and official seal
this day of A. D. 18....

(Signature of officer)."
(Rem. db Bah Code, Sec. 8761i).

"Certificates of acknowledgment of an
instrument acknowledged by a corporation
substantially in the following form shall,
be sufficient:

State of

County of ' ' *

On this day of A. D. . . . ,

before me personally appeared

to me kno\Mi to be the (President, Vice-
President, Secretary, Treasurer, or other
authorized officer or agent, as the case may
be) of the corporation that executed the

-19-

witliiii and foregoing instrmnent, and ac-
knoAvledged the said instrnment to be the
free and vohmtary act and deed of said
corporation, for the nses and purposes
therein mentioned, and on oath stated that
he was authorized to execute said instru-
ment and that the seal affixed is the corpor-
ate seal of said corporation.

In Witness Whereof, I have hereunto
set my hand and affixed mv official seal the
day and year tirst a))ove written.

(Signature and title of officer)."

The mortgage, the validity of which is here in
question, covers both real and chattel property,
though consideration of that fact does not seem to
have been given by the trial court. A reference
to the statutes of Washington shows that different
questions arise in determining its validity as a chattel
mortgage from the questions which arise in de-
termining its validity as a real mortgage. Some of
the questions, however, are the same, and so far
as they can be discussed together, we propose to so
discuss them. The statute providing for the ac-
knowledgment and record of chattel mortgages is
as follows:

{Rem. d: Bah Cor?r% Sec. 3660).

"A mortgage of personal property is

void as against creditors of the mortgagor or

subsequent purchasers and eyicunihrancers

of the property for value and in good faith

-20-

unless it is accompanied by the affidayit of
the mortgagor that it is made in good faith,
and A^ithout any design to hinder, delay or
defraud creditors, and it is acknowledged
and recorded in the same manner as is re-
quired b}^ law in conveyance of real prop-
erty. ' '

The statute providing for the recording of
deeds, mortgages, etc., is as follows:

{Rem. d: Bed Code, Sec. 8781).
"All deeds, mortgages, and assignments
of mortgages, sliall be recorded in the of-
fice of the county auditor of the county
where the land is situated, and shall be
valid as against bona fide purchasers from
the date of their filing for record in said of-
fice ; and when so filed sliall be notice to all
the world."

Referring to Fern, cf Bal. Code, Sec. 3660, as
to chattel mortgages, the court ^^ill note that the
mortgage is not void generally, Init only as against
creditors, subsequent purchasers, and encumbranc-
ers of the property for value and in good faith.
There are no subsequent purchasers or encumbranc-
ers in tills case, and the mortgage, if void as a chattel
mortgage, is so only as against creditors. The record
shows mthout dispute that all of the creditors be-
came such after the execution and recording of the
mortgage now in question. If the mortgage is in-
valid as a chattel mortgage at all, it must be as
agamst these subsequent creditors. But the Supreme

-21-

Court of the State of Washington has twice held
that the language of section 3660 refers only to per-
sons who were ereditors at the time of the execution
of the mortgage and does not refer to subsequent
creditors. See Roy vs. Scott, 11 Wash., 399, where
the court uses this language :

"The word 'subsequent' relates not to
creditors, but to purchasers and encum-
brancers. As between mortgagor and mort-
gagee the instrument is valid and binding
as a mortgage without the affidavit, and Mc-
Naught, being at that time a mere stranger
to the property and having no interest in
it, cannot invoke the aid of the statute,
which favors a class to which he does not
belong. ' '

McNaught was a subsequent creditor. The
mortgage was also held valid as to Johnson, a sub-
sequent encumbrancer.

See also Urquhart vs. Cross, 60 Wash., 249.
It is beyond doubt the law of this state, as
determined by its highest court, that the statute re-
quiring the acknowledgment of a chattel mortgage
and an affidavit of good faith invalidates the mort-
gage for want of compliance thereT\dth onUj in favor
of creditors who were such at the time of the giving
of the mortgage. As there are no such creditors
here, we think the mortgage must be sustained as a
chattel mortgage.

Section 8781, Rem. d- Bal. Code, taken in con-
nection with Section 8746, Rem. d Bal. Code, makes

.90_

real estate mortgages valid as to hona fide purcliasers
when tliey have been acknowledged and recorded.
We think it clear that the effect of the statutes, so
far as they relate to mortgages of real property is
that they are valid as to all except bona fide pur-
chasers when they are executed and delivered
whether they are acknowledged or recorded or not.
It is free of doubt that a deed or mortgage not ac-
knowledged, or defectively acknowledged, in this
state is operative against the gi'antor and his heirs
and those claiming under him : .

Edson vs. K'tiox, 8 Wash., 642.

Carson vs. Tlwmpson, 10 Wash., 295.

Matson vs. Johnson, 48 Wash., 256.

Litae vs. Gilih, 57 AYash., 92.
It is also clear under our statutes that judgment
creditors have liens only on the actual interest of the
judgment debtor, and on purchasing at their own
sales are not l^ona fide purchasers.

Daivson vs. McCartfj, 21 Wash., 314.

Woodhurst vs. Cramer, 29 Wash., 48.

Book vs. WUley, 8 Wash., 267.

Matson vs. Johnson, 48 Wash., 256.

Hacker vs. White, 22 Wash., 415.

Am. Savings dc Trust Co. vs. Helgeson, 64
Wash., 54, Op. 64; 67 Wash., 575-6-7.

In the last cited case the Supreme Court says:

"A little consideration makes it equally
plain that the appellant Helgesen stands in
no better position than the Ericksons. He
claimed under a judgment lien. He was an

-23-

execution creditor purchasing at his own
sale. Under the established rule in this
state, he was not a bona fide purchaser. He
took no greater rights than the execution
debtor had. His judgment was a lien upon
the real, not the apparent interest of the
debtor."

In the case of Dawson vs. McCarty, supra, and
Hacker vs. White, 22 Wash., 415, it is held that an
unrecorded mortgage or deed is entitled to priority
over a subsequent judgment.

In the case of Woodhurst vs. Cramer, supra, it
is held that wdiere a mortgage has been foraially re-
leased of record though not actually paid, such
mortgage is entitled to priority over a subsequent
judgment.

Since the trustee in bankruptcy takes only the
rights which the creditors w^hom he represents w^ould
have had, had not bankiiiptcy intervened, and since
it appears that this mortgage so far as it is a real
estate mortgage would prevail in the state courts,
even if it were not acknowledged and not recorded,
it seems clear that the trustee's rights are subsequent
and inferior to the rights of the mortgagee.

(b) The policy of the statutes of this state and
of the courts is liberal tvith the view to sustaining
the intent of the parties and in line theretvith the
courts consider the entire instrument and all its
recitations in order to determine its validity.

The policy of the statutes of this state from the
formation of the state down to this time has been

-24-

towards liberality in requirement of acknowledg-
ments and in the execution of instruments generally.
This is illustrated not onh^ by various curative stat-
utes, but by Section 8784, Beyn. d- Bed. Code, as
follows :

"Every instrument in writing purport-
ing to convey or encumber real property,
which has been recorded in the proper
auditor's office, although such instrument
may not have been executed and ac-
knowledged in accordance with the law in
force at the time of its execution, shall im-
part the same notice to third persons, from
the date of recording, as if the instrument
had been executed, acknowledged and re-
corded in accordance with the laws regulat-
ing the execution, acknowledgment, and re-
cording of such instrument then in force."
See also Bern, d B(d. Code, 8757, 8764.

The construction of the statutes of this state
by the Supreme Court has uniformly been in accord
mth the liberal policy of the statutes themselves. In
the case of Blooming dale vs. Weil, 29 Wash., 634,
a foreign acknowledgment taken without an official
seal and without a certificate of a court of record
was upheld. The court held tliat there was a proper
acknowledgment, but a defective certification, and
that such fact did not affect its operative force, at
least in equity, as against the grantor or one who is
not a bona fide purchaser.

In the case of Carson vs. TJiompsori, 10 Wash.,

-25-

295, the Supreme Court, in sustaining a. deed im-
properly witnessed, used this language:

' ' It is evident therefrom that the settled
policy of the law was to render valid and
give force and effect to all conveyances vol-
untarily and in good faith signed by tlie
grantors, and not to render such deeds in-
effectual in consequence of an inforaiality
or defect as to the proof of their execution,
and such pui-pose has been further recog-
nized and continued by subsequent legislat-
ive acts. It is evidence that the signature of
the grantor was regarded as the important
and essential thing. An acknowledgment
of an instrument is but a manner or form
of attesting its execution. The requirement
of witnesses is but another, although addi-
tional form of attesting it."
The mortgage in controversy was executed in
the State of Washington and related to Washington
property. The corporation making the mortgage
is a Washington corporation. The bankruptcy
proceeding is in the Federal Court for the Western
District of Washington. Bearing always in mind
that the bankruptcy statute is not intended to give
new rights, but is only a method of winding up the
assets of the corporation which has become insolvent
in such manner as to preserve the rights of all par-
ties, and that the question in every case is what
rights would the creditors represented by the
TiTistee in bankruptcy have in the state courts, we
contend that from the policy of the statutes and of

-26-

tlie courts of this state the rights under appellant's
mortgage are property rights AVhich the Federal
Court should respect, and if from the foregoing
the court is of the opinion that in the Supreme Court
of the State of Washington the appellant's mortgage
would be upheld, we are entitled upon that ground
alone to have the mortgage upheld in this court.

The instrument imder consideration begins as

follows :

"This Inden^ture, made this 2nd day
of December, 1910, between the Raymond
Box Compai\y, a corporation organized
and existing under the laws of the State of
Washington, party of the first part, and the
Pacific State Bank, also a corporation, or-
ganized and existing under the laws of the
State of Washington, party of the second
part. ' '

(Record, page 18).
The witnessing clause of the mortgage and the

signatures, acknowledgment, and affidayit of good

faith are in the following form :

'•In Witness Whereof^ the said party
of the first part has hereunto affixed its cor-
porate seal and these presents to be affected
by its President and Secretary ^\dth the au-
thority of the Board of Trustees.

Raymond Box Coin ep any.
By J. A. Heath, President.
Attest :

Miles H. Leach, Secetary.
(Seal of the Coi^p oration.)

-27-

State of Washington, ) ^^
County of Pacific. (

Be it remembered that on this 2nd day
of December, 1910, before me, the under-
signed, a notary public in and for the State
of Washington, personally appeared the
within named J. A. Heath and Miles H.
Leach, each to me well knowm to be the iden-
tical persons above named and whose names
are subscribed to the within and foregoing
instrument, the said J. A. Heath as Presi-
dent and the said Miles H: Leach, as Secre-
tary of said corporation, and the said J. A.
Heath acknowledged to me then and there
that he as president of said corporation had
affixed said name, together with his own
name, freely and voluntarily, as his free
act and deed, and the free act and deed of
said corporation; and the said Miles H.
Leach also then and there acknowledged to
me that he as secretary of said coi-poration,
had signed the above instrument as secre-
tary of said corporation as his free and vol-
untary act and deed and the free and vol-
imtary act and deed of the said corporation.

Witness my hand and official seal.

H. W. B. Hewen,
Notary Public, residing at South Bend,
Washington.

(Notarial Seal)

-28-

AFFIDAVIT.

State of Washington,

County of Pacific. ^ ^^'

We, J. A. Heath and Miles H. Leach,
President and Secretar}^ respectively of the
Raymond Box Compan}^ a corfDoration,
the above named mortgagor, after being
duly sworn on oath, say that the foregoing
mortgage is made in good faith and without
any desire to hinder, delay or defraud
creditors.

Miles H. Leach.
J. A. Heath,
Sworn to and subscribed before me this
2nd day of December, 1910.

H. W. B. Hewen,
Notarv^ Public residing at South Bend,
Washington.

(Notarial Seal)."

(Record, pages 18 to 24 inc.)

It is our contention that in determining the
validity of the mortgage the entire instrument should
be taken into consideration. From all of these re-
citals, it appears that the corporate seal was attached
to the instrument and executed by the President and
Secretary with the authority of the Board of Trus-
tees; (see witnessing clause), that Heath and
Leach, President and Secretary respectively, ac-
knowledged said instrument as President and Sec-
retary, as their free and voluntary deed and the free
act and deed of the corporation, and that the mort-

-29-

gage was made in good faith without any design to
hinder, delay or defraud creditors.

The case of Descret National Bank vs. Kidman,
71 Pac, 873, was a case where it was claimed that
the mortgage was insufficiently acknowledged be-
cause the certificate of acknowledgment did not state
that the person who executed the mortgage was the
same person who acknowledged its execution, but the
Supreme Court of Idaho used this language:

"In the case at bar, looking at the af-
fidavit attached to the mortgage, immediate-
ly preceding the acknowledgment, we find
from the jurat that the affidavit was sub-
scribed and sworn to before the same notary
public who took the acknowledgment of the
mortgage. This certificate, read with this
affidavit, clearly shows that the party who
executed the mortgage was the same person
who acknowledged the execution of the
same. ' '

Another instance of aiding the acknowledgment
by looking at the other portions of the instrument
is found in the opinion of Mr. Justice Field in the
case of Carpenter vs. Dexter, 8 Wallace, 513-27; 19
L. Ed., 426, quoted from in the case last cited, where
Mr. Justice Field says:

"The law of Illinois in force in 1847
upon the manner of taking acknowledg-
ments, provides that no officer shall take the
acknowledgment of any person unless such
person 'shall be personally known to him to

-30-

be the real person who (executed the deed)
and in whose name such acknowledgment
is proposed to be made, or shall be proved
to be such by a creditable witness, ' and such
personal knowledge or proof shall be stated
in the certificate. Looking now to the deed
itself, we find that the attestation clause
states that it was 'signed, sealed and deliv-
ered,' in the presence of the subscribing
mtnesses. One of these witnesses was the
Justice of Peace before whom the acknowl-
edgement was taken; and he states in his
certificate, following immediately after the
attestation clause, that the 'aboA^e named
William T. Davenport, who has signed,
sealed and delivered the above instrument
of writing, personally appeared' before him
and acknowledged the same to he his free
act and deed. Read thus witli the deed the
certificate amounts to this: That the
grantor personally appeared before the of-
ficer, and in his presence, signed, sealed
and delivered the instrument, and then ac-
knowledged the same before him. An af-
firmation in the words of the statute could
not more clearly express the identity of the
grantor with the party making the acknowl-
edgment. ' '

A defect in the acknowledgment of a corporate
instrument is overlooked by the courts if there is
sufficient to indicate an intent to acknowledge.
Cook on Corporations, 6th Ed., 722, and cases cited.

-31-

We insist that even if the form of acknowledg-
ment set ont in the statute is exclusive, the acknowl-
edgment ^^dth the remainder of the instrument is a
substantial compliance therewith, and the statute,
hy its terms, only requires a substantial compliance,
(c) There is no aetiial irregularity in the ac-
knotvledgment.

We contend, however, that the statutes of the
state, so far as they prescrijie the contents of an ac-
knowledgment have been literally complied with.
The only statute really prescribing wdiat an acknowl-
edgment shall contain is Bern, d' Bal. Code, Sec.
8759, as follows:

"The person or officer taking such
acknowledgment shall certify the same
by a ceiiificate written on or amiexed
to said mortgage, deed, or instrmTaent,
w^hicli certificate shall be mider his
official seal, if any he has, and such
certificate shall recite in substance that
the deed, mortgage or instrument was ac-
knowledged by the person or persons whose
name or names are signed thereto as grantor
or principal before him as such officer, with
the date of such acknowledgment."
This section is taken from an act which relates
to the acknowledgment of a foreign deed, but has
been held applicable to a deed acknowledged within

the state.

Forrester vs. BeliaUe Transfer Co., 59
Wash., 92.

-32-

Barring that section, the statutes do not any-
where prescribe the contents of an acknowledgment.
Section 8761 contains a form for individual acknowl-
edgment which the statute itself says shall he suf-
ficient, hut does not make the form exclusive. Sec-
tion 8761i contains" a form for an acknowledgment
of an instrument signed by a corporation which the
statute says shall he sufficient, hut the statute does
not make this form exclusive. Attention is called to
the fact that the language of the two sections just
referred to is identical. In both it is declared that
the forms set out are sufficient. In neither is the
form made the exclusive form.

In the case of Kley vs. Geiger, 4 Wash., 484, the
Supreme Court, passing upon the validity of a mort-
gage which was claimed to be defective because the
acknowledgment, although it complied with Section
8759, did not comply with Section 8761 (being the
same sections therein referred to as sections 1435
and 1437, general statutes) uses this language:

"The ol)jection to the acknowledgment
is, that the officer before whom the same was
taken did not certify that said defendants
executed said mortgage freely and voluntar-
ily. The acknowledgment does state that
said parties appeared before such officer,
and acknowledged that they signed and exe-
cuted the same, and contains the further
statement that upon the separate examina-
tion of the said Ida Geiger ajDart from her
husband, she acknowledged that she signed

-33-

tlie same voluntarily. There is no force in
tlie objection to the acknowledgment. Sec.
1435 of the General Statutes, which was in
force at that time, provides that certificates
of acknowledgment shall recite in substance
that the deed, mortgage or instrument was
acknowledged by the person or persons
whose name or names are signed thereto as
grantor. Sec. 1437, which was also in force
at that time, provides that the certificate of
acknowledgment substantially in the form
there given shall be sufficient, which form
contains a recital that the execution of the
instrument was the free and voluntary act
of the party executing the same. It does
not provide that this fonn of acknowledg-
ment shall be exclusive, and we are satisfied
the acknowledgment which was taken
wherein the defendants acknowledged that
they signed and executed the mortgage with-
out any further statement that they volun-
tarily did the same, was sufficient."
It is material to note that the decision just above
referred to was rendered long prior to the time
when the Legislature enacted Section 8761^, the
latter section being incorporated in the Session Laws
of 1903. The Legislature, therefore, had in mind
when it enacted Section 8761 J the construction
which the Supreme Court of this state had given to
Section 8761. Nevertheless, the Legislature used the
same language theretofore employed in Section 8761 ;
that is, the Legislature prescribed a form which it

-si-
declared should ]je sufficient and the Supreme Court
had already held that this language did not make
the form exclusive. It seems clear that the Legisla-
ture intended that the form for coi'porate acknowl-
edgments set out in Section 8761^ should be a guide
to go by, but not exclusive of other forms which
complied with existing statutes. Had it intended
to make the form set out in 8761i exclusive, it would
not have used language prescribing the form which
had already been construed by the Suj^reme Court
not to be exclusive of other forms. It seems to us,
therefore, to be clear that following the construction
of the statutes of this state already given to the
statutes by the Supreme Court, this court must up-
hold the acknowledgment as an exact and literal
compliance vvdth the statutes of the state.

If our argument just preceding is sound, then
the acknowledgment is absolutely in accordance with
the statute. Rem. & Bal. Code, 8759, headed "Cer-
tificate of foreign acknowledgments," but re-
ferring to foreign and domestic acknowledgments,
{Forrester vs. Reliable Transfer Company, supra)
requires that "the person or officer taking the ac-
knowledgment shall certify the same by certificate

written on or annexed to the mortgage under

his official seal and shall recite in substance

that the mortgage was acknowledged by the

person or persons wliose names are signed thereto

as grantor or principal before such officer, with

the date of such acknowledgment."

Every requirement of tlie statute has been lit-

-35-

erally complied with. If we are right in the fore-
going argument that the corporation form set out
in the statute is not exclusive, then there can be no
contention based upon any reason, however technical
or fine drawn, but that the mortgage in controversy
is valid. -

The object of the courts, especiallv in this state,
has been to get at the actual intent of the parties.
It has not been to draw fine distinctions which woidd
invalidate instruments intended by the parties to
bind them. The supplemental opinion of the trial
court, setting out as it does that the parties signed,
sealed, acknowledged and delivered the instrument
to secure a bona fide debt, is the best argument pos-
sible, in view of the settled policy of this and other
states, why it should be sustained as a valid mort-
gage.

We do not have in this case any question arising
where a bona fide purchaser or incumbrancer, in
ie-norance of the facts, advanced money on the faith
of the unincumbered ownership. These people are
protected by the statute. We do not have here the
case of an unrecorded instrument where the holder
of the mortgage has, by his carelessness or fraud,
led others to advance their money. As far as actual
acknowledgment and actual recording could protect
the subsequent creditors they have been protected.
The points raised as to the validity of the instru-
ment are highlv technical. No one has been actually
injured. Up to the time when a la^^^er, looking for
defects, examined the instrument with care and com-

-36-

pared the words of the acknowledgment with the
optional foiiii set out in the statute, nohody knew
that there was any possibility of beating the mort-
gagee out of the money which he had advanced on
the faith of this instrument. If the point is sus-
tained, then the technicalities of the law^ are success-
fully set up to avoid the actual rights and the actual
equities of the parties. We contend that the court
should investigate the merits of the controversv with
a view to determinino- the rights of these parties
according to the actual intent and the actual mean-
ing, and should be keen to uphold ratlier than keen
to destroy the contract which was made.
Respectfully submitted,

H. W. B. Hew^en,
Maurice A. Langhorxe,
Elmer M. Haydex^

Attorneys for Appellant.

No. 2193

IN THE

ited States Circuit Court of Appeals

FOR THE NINTH CIRCUIT

THE PACIFIC STATE BANK, a

corporation,

Appellant,
vs.
A. S. COATES, as Trustee in Bank-
ruptcy of Raymond Box Com-
pany, a corporation, bankrupt, et al,

Appellees.

STATEMENT OF THE CASE.

1. This case was tried in the court below, upon
affidavits and stipulations as to certain agreed facts, all
of which are made a part of the record and appear
in the transcript.

2. The Pacific State Bank and the Raymond
Box Company are, and each is a corporation organized
and existing under and by virtue of the laws of the
State of Washington.

.3. That on the 2nd day of December, 1910, the
Raymond Box Company was indebted to the Pacific
State Bank in the sum of $23,400.00 and on said date
J. A. Heath and ]Miles H. Leach, president and secre-
tary, respectively, of the Raymond Box Company,
executed and delivered to the Pacific State Bank the
instruments pur])orting to he a ])romissory note and

mortgage and being the same mortgage the vahdity or
hen of which, is in issue.

4. That said promissory note and mortgage were
and each was given for a pre-existing indebtedness
which the said Raymond Box Company owed to the
said Pacific State Bank.

See affidavit of Samuel McMurran found on page
57 of Transcript of record and the same is as follows:

STATE OF WASHINGTON, ]
COUNTY OF PACIFIC. i ^^•

Samuel ^IcJNIurran, being first duly sworn, upon
oath deposes and says: That he is a resident of Ray-
mond, Pacific County, Washington; that he is em-
ployed as bookkeeper for the W. W. Wood Company
of this city; that he has had 25 years' experience as a
bookkeeper.

That on or about the 15th day of February, 1912,
A. S. Coats, who was then temporary receiver for the
Raymond Box Company, and requested that he audit
the books and prepare a statement, and that thereafter
he did examine and audit said books and accounts of
the Raymond Box Company, and from the audit so
made, found, and now finds that the purported mort-
gage now held by the Pacific State Bank, and which
the bank alleges was given by the Raymond Box Com-
pany to secure a note in the sum of $23,400.00 was
given and dated on December 2, 1910, and was given
for a pre-existing debt.

That at the time said ])urporting mortgage was

given as aforesaid, the amount due thereon was the only
sum which the Raymond Box Company then owed
and at that time it had no indebtedness whatever,
except the amount due on said note and purported
morto^affe, and all of the accounts which it now owes
and which was owing at the time it was adjudicated
a bankrupt, liave been created since the execution of
said instrument, and said accounts in addition to the
amount due to said bank, amount in the aggregate to
about $14,000.00.

SAMUEL McMUEEAN.

Subscribed and sworn to l)efore me this loth day
of April, A. D. 1912.

(SeaL)

MARTIN C. WELSH.

Notary Public in and for the State of Washington,
Residing at Raymond, Washington.

5. It is stipulated by the parties that the value
of the real and personal property described in said
instrument claimed to be a mortgage, is approximately
and does not exceed $20,000.00.

See page 88 of Transcript of record.

6. The pro])erty covered by the alleged mortgage

is practically all of the ]:)roperty of the bankrupt cor-
poration.

See allegations 6 and 7 of Appellant's j^etition,
pages 6 and 7 of Transcript.

7. That there was due on said purported mort-
gage from the bankrupt corporation to the Pacific
State Bank, on the 18th of March, 1912, $22,3.57.71,
with interest from October 1, 1911.

Stipulation pages 86 and 87 of Transcript.

8. That the value of the real and personal prop-
erty covered by the mortgage does not exceed
$20,000.00.

Stipulation page 88 of Transcript.

9. That the bankrupt corporation is indebted in
the sum of about $14,000.00 to the answering creditors,
other than the Pacific State Bank, and that all of said
creditors became such subsequent to the execution of
said instrument which appellant, claims to be a mort-
gage, and prior to the adjudication in bankruptcy,
and that the following creditors had no actual knowl-
edge of the fact of said alleged mortgage prior to the
time that said bankrupt became indebted to them,
to-wit :

Raymond Foundry & Machinery Company, Siler
^lill Company, Willapa Lumber Company, ^V. W.
Wood Company, Pearce Brothers and T. H. Bell.

Stipulation pages 88 and 89 of Transcript.

10. That at all times prior to the filing of the
petition by the appellant for leave to foreclose, and at
all times since and now the Trustee was and is in the

full actual and manual possession of all of the propert}^
of the bankrupt described in the mortgage.
Stipulation page 89 of Transcript.

11. That the purported mortgage was recorded hi
the real estate mortgage records of Pacific County, on
December 8, 1910, and was filed on same date as a
chattel mortgage, but was not recorded as such chattel
mortgage.

Stipulation page 88 of Transcript.

12. The lower court held that the mortgage was
void, and decreed that the claim of the Pacific State
Bank be allowed as a general claim, and its claim for
preference based upon its alleged mortgage be re-
jected.

Pages 92 to 107 of Transcript.

1.3. That J. A. Heath and M. H. Leach were
not the sole owners of all of the stock of the bankrupt
corporation at the time of the execution of this mort-
gage. The president, J. A. Heath, on or about May
1st, 1908, made an absolute sale of an undivided one-
half interest in forty shares of the capital stock of the
bankrupt corporation, the same to be delivered when
the indebtediiess of the bankrupt to the appellant was
])aid and the stock released; and that subsequent to the
execution of this mortgage Efiie jNIcKenzie commenced
an action against the said J. A. Heath to recover this
stick or its value. (Record. T. P. 69, 70, 71, 72, 73
and 71^).

From said judgment appellant has appealed.

ARGUMENT, POINTS AND AUTHORITIES.

The judgment of the court below should be af-
firmed for the following reasons:

FIRST.

The powers of the corporation are measured by
its charter not only as to the things which it may law-
fully do, but also as to the mode in which it may do
them. If the charter requires the powers conferred to
be exercised in a particular manner, or by particular
officers or agents, and the provision is not merely direc-
tory, it can only exercise them in the mode pointed
out.

7 A. &, E. Enc. of Late (2nd Ed.) 701.

3 Washhuru on Real Property (4th Ed.) 262.

U. S. Bank vs. Danhridge, 12 ^Vheat. 64.

Beatty v. Marine S. Co., 2 Johns, 109.

Pennsylvania L. R. Co. v. Board of Educa-
tion, 20 W. Va. 360.
Under the laws of the State of ^Vashington char-
ters are not granted by the legislature to private cor-
porations, but they are incorporated by the persons
comprising the corporation voluntarily organizing and
signing articles of incorporation under the general stat-
ute, and the charter of such corporation is necessarily
the statutes relating to the formation of private cor-
porations and the voluntary articles whicli are filed
under them.

The general laws as to private corporations of tlie
State of Washington may be brieflr summarized as
follows :

Section 3686 Rem. k Ball. Codes of Washington.

The corporate power of a corporation shall be ex-
ercised by a Board of not less than two trustees who
shall be stockholders in the company-, and at least one
of them shall be a resident of the State of Washing-
ton, and a majority of them citizens of the United
States, who shall, before entering upon the duties of
the office, respectively take and subscribe to an oath
as provided by the laws of this state, and who shall,
after the expiration of the term of the trustees first
elected, be annually elected by the stockholders, etc.

Section 3688, Idem, provides that a majority of
the wh:)le number of trustees shall constitute a board
for the transaction of business, and every decision of a
majority of the persons duly assembled as a board shall
be valid as a corporate act.

Among the enumerated corporate powers vested in
the corporation, section 3683, of the same code, pro-
vides: That such corporation shall have the power to
purchase or mortgage, sell and convey real and per-
sonal property.

It will thus be seen that a private corporation in
this state can only exercise powers as such by and
through its Board of Trustees. Only the trustees have
power to mortgage the property of the corporation,
and UD act in the name of such corporation and seek-
ing to bind the corporation can be lawfully performed
except by the Board of Trustees. The president and
secretary have no original powers, nor governing pow-
ers, and the\' have no authority, excepting certain min-

isterial acts by which they exercise powers delegated
to them by the Board of Trustees. Every officer of
a private corporation is subject to the will of a major-
ity of the trustees comprising the board. To consti-
tute a mortgage a valid mortgage and binding upon
a corporation and its stockholders, the making, execu-
tion and delivery thereof must emanate from and be
directed by the Board of Trustees, evidenced by a
proper record of such proceeding spread upon the min-
utes of the corporation. The power to perform the
ministerial act of making, executing and delivering
such mortgage may be delegated to an officer of the
corporation, usually the president and secretary, but
these officers can only exercise such authority as has
been delegated to them by the Board of Trustees.
Their powers are practically the same as an attorney-
in-fact. Their acts are limtied to the authority con-
ferred upon them by the Board of Trustees, hence a
mortgage executed by the president and secretaiy of a
corporation to be valid must be the act of the corpora-
tion itself and not of the president and secretary. The
personality of the president and secretary are impo-
tent, and their acts as individuals are of no effect. The
substantial requisite is that to constitute a valid mort-
gage it must be the act of the corporation.

Some stress is laid upon certain decisions of the
Supreme Court of Washington holding that if the
persons performing the act in question, constitute the
entire holding power of the corporation, then the for-
mality of action })y the governing body of the corpora-
tion may be dispensed with.

In this case, as will fully appear from the tran-
script from the superior court of the State of Washing-
ton in and for the County of Pacific, in an action
brought by Effie McKenzie against J. Albert Heath
(Record, page 69 et seq.) it appears from the findings
of that state court that on ^lay 1, 1908, eighteen
months before the date of this mortgage, J. A. Heath
sold absolutely an equal and undivided one-half inter-
est in forty shares of the capital stock of the bankrupt
corporation, delivery to be made as soon as the then
certificates were released from the bank (Appellant)
where the same were held as security for a loan to the
bankrupt. This sale was absolute and ^Irs. ^IcKenzie
became the legal owner of these shares of stock, al-
though not accompanied by delivery, and as to the same
J. A. Heath became trustee for ]Mrs. :McKenzie. It
is true that he reserved the right to vote this stock,
but that did not effect her ownership or right to notice
from the Board of Trustees as to the making of a con-
templated mortgage jeopardizing her entire interest.
While it is true that she could not vote, perhaps, it is
equally true tliat tlie courts would have afforded her
relief by injunction, in case the trustee were acting un-
lawfi lly or fraudulently.

The bankrujjt corporation was located in the City
of Raymond. The mortgage and the certificate of ac-
knowledgment were executed at South Bend away from
the office of the bankrupt, and possibly surreptitiously,
in order tliat ^Nlrs. ^McKenzie should be wholly unaware
of the danger in which they were placing her interest.
Suppose ileath did convert this stock. He was a

trustee, and if he could lawfully act on December 2,
1910, and make the mortgage in question he must have
been a stockholder and possessed of stock in the bank-
rupt, and it is the universal rule, deduced from the de-
cisions of the courts, that in legal effect instead of em-
bezzlement and disposing of the stock of INIrs. JNIcKen-
zie he Avould be held to have sold his own stock and
Mrs. McKenzie's right of ownership was not impaired
at the time of the execution of the mortgage beyond
the difference in the amount of stock held and owned
by Heath and the interest which she had.

SECOND.
Tliat the purported mortgage is void because the
notary public who took the acknowledgement does not
certify that the persons who executed it were known to
him to be the officers of the corporation. It is void be-
cause the certificate of acknowledgment does not show
that the officer or officers who e.vecuted the instrument
were sworn and on oath stated that they were author-
ized to execute the instrument, and that the seal affixed
is the corporate seal of the corporation.

The statutes of the state so far as applicable are
as follows:

{Rem. & Bal. Code, Sec. 8745.)

"All conveyances of real estate or of any interest
therein, and all contracts creating or evidencing any
encumbrance unon real estate, shall be by deed."
{Rem. k Bal. Code, Sec. 8746.)

"A deed shall be in writing, signed })y the party
bound thereby, and acknowledged by the party making

it, before some person authorized by the laws of this
state to take the acknowledgment of deeds."

As to acknowledgments by a corporation, at the
time of the execution of said pretended mortgage, the
laws of the State of Washington provided and now ])ro-
vide as follows:

"Certificates of acknowledgment of an instrument
acknowledged by a corporation substantially in the fol-
low^ing form shall be sufficient:

STATE OF WASHINGTON, [ „

COUNTY OF PACIFIC. \

"On this day of , A. D. 19. .,

l)efore me personally appeared ?

to me known to be the ( president, vice-president, secre-
tary, treasurer, or other authorized officer or agent,
as the case may be) of the corporation that executed
the within and foregoing instrument, and acknowledged
the said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that he w^as au-
thorized to execute said instrument and that the seal
affixed is the corporate seal of said corporation."

"In witness whereof, I have hereunto set my hand
and affixed my official seal the day and year first above
written."

(Signature and title of officer."
Rem. k Bal. Code of Washington, Sec.

87611/2-
(L. '03, p. 24.5, Sec. 1.)

The above statute is repugnant to the general stat-
utes relating to acknowledgQient of msirunients, and the
same is exclusive and mandatory.

The certificate of acknowledgment to the instru-
ment in issue, is as follows:

STATE OF WASHINGTON, j
COUNTY OF PACIFIC. i

"Be it remembered that on this 2d day of Decem-
ber, 1910, before me, the undersigned, a notary public
in and for the State of Washington, personally ap-
peared the within named J. A. Heath and JNIiles H.
Leach, each to me well known t^ be the identical per-
sons above named and whose names are subscribed to
the within and foregoing instrument, and said J. A.
Heath, as president and the said ^Nliles H. Leach, as
secretary of said corporation, and the said J. A. Heath
acknowledged to me then and there that he as president
of said corporation had affixed said name together with
his own name, freely and voluntarily as his free act
and deed and the free act and deed of said corpora-
tion; and the said Miles H. Leach also then and there
acknowledged to me that he as secretary of said cor-
poration had signed the above instrument as secretary
of said corporation by his free and voluntary act and
deed and the free and voluntary act and deed of the
said corporation." "Witness my hand and official seal.
(Notarial Seal.) H. W. B. HE WEN,

Notary Public for the State of Washington,

It will be observed that the statute ])ositively de-
clares that the certificate shall show that the officer or

officers, who execute tlie instrument, teas srcorn and on
oath stated that he was authorized to eocecute the instru-
ment and thai the seal affiiVed is the corporate seal of
the corporation.

It will also be observed that the statute requires
the officer taking the acknowledgment to certify, that
the person ejceciiting the instrument is known to the
notary public to be the identical officer of the corpora-
tion, which the person so executing the instrument
claims to be.

The certificate of acknowledgment to the instru-
ment in question contains neither of the above essential
facts.

The persons who executed it were not sworn, and
neither of them, stated on oath that he was authorized to
execute the instrument.

The notary public before whom the purported ac-
knowledgment was taken, does not certify that either
of said persons was an officer in any capacity of the
c3r])oration.

The acknowledo-ment does not substantially com-
ply with the statute.

The instrument was and is void. It is not valid
either as a real estate nor as a chattel mortgage. It
creates no lien on the property of the bankrupt corpora-
tion.

The statutes of Washington, Section 876lVo of
Rem. & Bal. Code, requires the officer or officers who
assume to act for the corporation, to state on oath that
he was authorized to e.vccute the instrument, and that

the seal affiled is the corporate seal.

The statute also prescribes, that the notary public
must certify that the person assuming to act as a cer-
tain officer of the corporation, is known to the no-
tary public to he such officer of the corporation. The
certificate must follow the statute which is mandatory.

Smith V. Guar. Dental Co., 114 X. Y. S. 867.

The acknowledgment to the instrument in ques-
tion contains none of the material facts required by the
statute.

The decisions of the courts are unanimous in hold-
ing such an instrument void.

2 Thompson on Corporations (2 ed.), Sec.

1884.
Forrester v. Reliable Transfer Co., 59 Wash.

86.
Anderson v. Frye & Brukn, 69 Wash. 89.
Cannon v. Deming, 53 X. W. 863.
Eiichson v. Conniff, 101 X\ W. 1104.
Holt V. Metropolitan Trust Co., 78 X\ W.

947.
Gage v. Wheeler, 21 X\ E. 1075.
Abney v. Ohio Lumber Co., 32 Southeastern

256.

The case last cited is very similar to the case at bar,
and because the officer who executed the instrument was
not sworn as required by the statute, the instrument
was adjudged to be void.

In 2 Thompson on Corporations (2 ed.), Section
1884, the author says:

"The statutes in many jurisdictions require a pe-
euhar form of certificate in the case of the execution
and acknowledgment of deeds by corporations; and it
must affirmative] If appear from the eertificate itself
that the requirements of such statutes have been sub-
staniiaUij complied idth." "The statutes in many jur-
isdictions require not only an acknowledgment on the
part of the corporation by the proper officer, but also
an oath or form as to the authority and identity of such
officer." "INI ore particularly such requiremnets are
that the officer or agent of the corporation must be
first sworn or affirmed by the magistrate taking the ac-
knowledgment, and he must under oath say: (a) "that
he is the officer or agent of the corporation described in
the particular writing, giving the date or other sufficient
description for the purpose of identification; (b) that
he is duly authorized by the corporation to execute and
acknowledge the deeds and writing of such corporation ;
(c) that the seal affixed to said writing is the corporate
seal of the corporation; (d) that the deed or writing
was sio-ned and sealed by him on behalf of said cor-
poration and by its authority duly given." "After such
deposition is given, the officer or agent must acknowl-
edge the deed or writing to be the act and deed of the
corporation." ''.ill of these facts must appear in the
certificate of the certifying officer, before the instru-
ment can be legally admitted to recordr "Under these
requirements a failure to show that the acknotdedging

party was duly stcoi'u and that he deposed to the faets
cotitained in the certificate, teas held to he fatal."

In John Forrester vs. Reliable Transfer Company,
59 Wash., 86, the Supreme Court of the State of
Washington said:

"We therefore think it is plain that our law re-
quires acknowledgment of the execution of such instru-
ments to be evidenced by certificate of the officer taking
the same, and written upon or annexed to the instru-
ment. It is also to be remembered that such instru-
ments are not now as formerly required to be w^it-
nessed. Code of 1881, Sec. 2311. 2312; Rem. & Bal.
Code, Sees. 8745, 8746. This fact would seem to en-
hance the importance of the certificate of acknowledg-
ment, for it now remains as the only official authenti-
cation of the execution of the instrument required by
our law." "In 1 Cyc. 616, the rule as to the admissibil-
ity of parol or other proof than the certificate, to prove
acknowledgment of the execution of an instrument is
stated as follows:

'It is the general rule that the official cer-
tificate is the only competent evidence of the
fact of acknowledgment; and where such cer-
tificate is defective in a matter of substance,
evidence aliunde is not admissible to show that
the statute was in fact complied with, and that
the officer, through mistake, failed to certify
tlie acknowledgment correctly. If such evi-
dence were allowed to supply a material part
of the certificate, then logically it would be ad-

missible to supply an entire certificate, and
the acknowledgment might therefore rest in
parol.'

"As we proceed let us remember that we are not
here concerned with a certificate of acknowledgment
which is merely defective in form and substance. We
are dealing with a problem involving the entire ab-
sence of any certificate having any reference whatever
to the execution of this lease by appellant, the lessor.
It is a matter of proving the acknowledgment absolutely
unaided by any certificate."

"In the case of Hayden vs. IVestcoti . H Conn. 129.
the court said:

'The statute requires that all deeds of land
shall be acknowledged; and the only question
is, how the acknowledgment shall be evidenced;
because it is obvious that if parol evidence may
be introduced, to aid a defective certificate, on
the same principle it may be introduced to sup-
ply one. The acknowledgment may rest in
parol, and the certificate of the magistrate may
be entirely dispensed with. The claim now
made inevitably leads to this conclusion. It
can only be necessary to observe that such a
claim is opposed to the uniform course of prac-
tice, to the spirit and meaning of the statute,
and to the authority of adjudged cases.'
In the comparatively recent case of Solt vs. Ander-
son. 71 Xeb. 826, 99 N. W. 678. the court observed:

'Running through all the cases will be
found a strong feeling against the admission of
parol evidence to show the due execution of
instruments affecting the title to real estate.
The present case shows that such feeling is not
unreasonable, and that sound considerations of
public policy demand that, where an acknowl-
edgment is necessary to give effect to an in-
strument, the evidence of the fact of such ac-
knowledgment shall be preserved in a perma-
nent form, and not left to the memory of liv-
ing witnesses. In this instance, after the lapse
of ten years, witnesses took the stand and tes-
tified to the exact legal phraseology used by the
parties in acknowledging the deed; other wit-
nesses were quite clear that no such language
was used. Human memory should not be put
to such a strain, nor land titles left to rest on
so inicertain ground.'

"This was said in a case where there was
no certificate, and the acknowledgment was
attempted to be proved by parol."

It was by virtue of the above decision of the Su-
preme Court of the State of Washington, and the uni-
versal rule and decisions of other courts, that Judge
Hanford, in deciding this case in the trial court, said:

"I find among the jjapers an affidavit by
JMr. Leach, secretary of the bankrupt corpor-
ation, affirming the facts omitted in tlie cer-

tificate of acknowledgment of the mortgage
and also stating that at the time of the execu-
tion of the mortgage, all of the stock of the
corporation was owned by himself and the
president of the corporation, who joined in
execution of the mortgage and that himself
and the president were the only trustees of
the corporation at that time." "I deem it
sufficient to say in regard to this affidavit that
it cannot be regarded as a plea of estoppel
nor as competent evidence, either to sustain
sneli a plea or to cure the defective certificate
of acknowledgment."

The ])rinciple that where the statute requires cer-
tain acts t :> be performed, that such acts are a part of
the execution of the instrument and not merely to per-
mit recording, has been again announced by the Su-
preme Court of Washington as late as June 18, 1912.
In the case of Anderson vs. Frye S^ Bruhn Inc. 124
Pac. Rep. 499, the following very pointed language, in
enunciating this principle, is used in the opinion of
Judge Parker:

"In compliance with these provisions, this
court has declined to recognize the validity of
leases and agreements for leases of real prop-
erty for a period exceeding one year w^hen
they are not in writing, and when they are
not acknowledged. Richards v. Redelsheinier,
3(3 Wash. 325, 78 Pac. 934; Watkins v. Batch ,
41 V^ash. 310. 83 Pac. 321, 3 L. R. A. (N.

S.) 852; Dorman v. Ploicman, 41 Wash. 477,
83 Pac. 322; Forrester v. Reliable Transfer
Co., 59 Wash. 86, 109 Pac. 312, Ann, Cs.
1912, 1093. In the last cited case the impor-
tance of the acknowledgment, in view of the
provisions of the statutes making it an act
to be performed as a part of the execution of
the instrument and affecting its validity rather
than as a mere prerequisite to its recording,
was pointed out. It is apparent, under these
statutory provisions, that the acknowledgment
of the instrument is as necessary to its validity
as that it be in writing, 1 Cyc. 514. In Ricli-
ards V. BedeJsheimer, touching the question of
the necessity of an agreement for a lease, as
well as a formal lease, being in writing, the
court said: "When we come to consider the
history of the statute, and the abuses which it
sought to correct, principal among them being
the tendency to fraud and perjury, it is diffi-
cult to distinguish any substantial difference
between an oral contract to execute a written
lease of real estate and an oral lease of real
estate. For instance, an oral lease, which was
clearly within the statute, could be construed
to be a contract for a lease, and thus take the
case out of the statute, and accomplish indi-
rectly what could not l^e done directly. Jirown,
Statute of Frauds 139, and eases therein cited,"
20 Cije. 229. Tliis huiguage would 1)0 ociuaily

ai)plic'al)le to the necessity of an acknowledg-
ment to the instrument, under our statutes above
quoted, since, as we have seen, acknowledg-
ment is as necessary as writing. If absence of
writing renders the contract void, the absence
of acknowledgment also renders it void."

And as Judge Hanford says, in one of his writ
ten opinions, in this case, (Record, page 100), the Cir-
cuit Court of Appeals for the Ninth Circuit, has re-
peatedly rendered decisions upholdhig the principle
that statute prescribing the mode of executing instru-
ments required to be recorded as evidence of rights
to property in this state, are mandatory and such in-
struments lacking the prescribed solemnities are void.

Chilhcrg v. Smith, 174. Fed. 805.
Mills r. Smith, 177 Fed. 652.
In re Oshorri, 194 Fed. 257.

Another case, exactly in point, from which no ap-
peal was taken, is that of First Nat. Bank v. Baker,
62 111. App. 154, in which the Illinois Court held that
the form of acknowledgment for corporations prescribed
by statute was imperative.

In Cannon r. Demig, 53 X. W. 863 (S. D.) the
Court says:

''Section 3288, Comp. Laws, relating to the
certificate of acknowledgment and to recording
transfers of real property, provides that 'such cer-
tificate of acknowledgment, unless it is otherwise
in this article provided, must be substantially in

the following form: (Venue) On this

day of , in the year

before me personally appeared

known to me, or proved to me on the oath of
, to be the person who is de-
scribed in and who executed the within instrument,
and acknowledged to me that he (or they) execut-
ed the same."

"In the acknowledgment upon the deed of as-
signment the words 'known to me or proved to me

on the oath of , to be the person

who is described in and who executed the within
instrument,' are omitted."

"Was this omission a fatal defect? The ac-
knowledgment of an instrument must not be
taken unless the officer taking it knows or has
satisfactory evidence, on the oath or affirmation
of a credible witness, that the person making such
acknowledgment is the individual who is described
in and who executed the instrument. Section
3281 Comp. Laws. There are at least four es-
sential facts that must substantially ap]3ear in the
certificate of acknowledgment, viz: (1) That the
person making the acknowledgment personally
appeared before tlie officer who makes the certif-
icate; (2) that there was an acknowledgment; (3)
that the person who makes the acknowledgment is
identified as the one who executed the instrument;
and (4) that such identity was either personally
known or proved to the officer taking the ac-

knowledgment. The statute requires that the cer-
tificate shall at least set out substantially these
essential facts."

"The authorities to this effect are numerous
and quite uniform."

"The identity of the party making the ac-
knowledgment is an essential feature, and must
appear in the certificate. See authorities collated
under title Acknowledgment,' 1 Amer. & Eng.
Enc. Law, p. 1.54. An examination of the cases
which hold that an omission of words of identity
is not a fatal defect shows that there did not exist
at the time a statute requiring such personal iden-
tification, or that tlie statute was substantially com-
plied with. See same authorities cited in the above
valuable work, at the same page. A majority of
the statutes of the several states require the cer-
tificate to show that the party acknowledging the
instrument was known to or proved to the officer
to be the person who executed it."

"This is deemed to be a matter of substances,
and an important safeguard against fraud."

In Erickson vs. Cnnniff, 101 X. W. 1104. 19 S.
D. 41, the C:)urt says:

"Rev. Civ. Code 1903, Sec. 974, provides that
the acknowledgment of an instrument must not be
taken, if executed by a corporation, unless the offi-
cer taking it knows or has satisfactory evidence
that the person making the acknowledgment is the

president or secretary; and section 981 gives the
form of a certificate of acknowledgment executed
by a corporation, and provides that the officer must
certify that the person acknowledging is known
or proved to be the president or secretary. Sec-
tion 636, Rev. Code Civ. Proc, 1903, provides
that, to entitle one to foreclose a mortgage by ad-
vertisement, any assignment of the mortgage must
have been duly recorded."
And the Court held,

"That where tlie certificate of acknowledg-
ment of an assignment of a trust deed given by a
corporation certified that the persons making the
acknowledgment were personally known to the of-
ficer to be the vice president and assistant sec-
retary of the cor])oration, the acknowledgment was
insufficient to authorize recording of the assign-
ment and a foreclosure of the trust deed by ad-
vertisement under section 636, was of no validity."

In Holt vs. Metropolitan Trust Co., 78 X. W.
947 (S. D.). the Court says:

"This appeal involves the validity of a real
estate mortgage foreclosure by advertisement. It
seems to be conceded by counsel that the validity
of the foreclosure ]:)roceeding de])ends upon the
sufficiency of the certificate of acknowledgment
of a certain assignment of the mortgage wliich
was recorded in the ])roper county. Such assign-
ment and certificate are as follows:

" 'For value received, the Fidelity Loan and
Trust Company of Sioux City, Iowa, does hereby
transfer and set over unto the Metropolitan Tinist
Company of the City of Xew York, trustee, all its
right, title, and interest, in and to a certain first
mortgage, for $.3,500, bearing date the 10th day of
July, A. D. 1891, executed by Nellie Holt and
husband upon 160 acres of land situated in Minne-
haha county, South Dakota, and described as fol-
lows: (Here the land is described.) Said mort-
gage having been duly recorded in Book 42 of
iNIortgages, on nage 159, of ^Minnehaha County,
South Dakota records, on the 15th day of July,
A. D. 1891. In witness whereof, the Fidelity
Loan and Trust Company has caused these pres-
ents to be signed and delivered by its president
and secretary this 27th day of August, 1891, with
the seal of the company affixed. Joseph Samp-
son, President. John C. French, Secretary. (Seal
of Fidelity Loan & Trust Co., Sioux City, Iowa).

"Witnesses: J. L. Ruine, E. C. Currier.

"State of Iowa. Woodbury County — ss. : On
this 27th day of August, A. D. 1891, before the
undersigned, a notary public in and for said coun-
ty, personally came Joseph Sampeson and John C.
Frencli to me personally known to be the identical
persons whose names are subscribed to the forego-
ing instrument as president and secretary of the
Fidelity L:)an & Trust Company, the grantor
therein named, and acknowledged said instrument
to be the act and deed of said company, by them,

as officers of said company, voluntarily done and
executed. Witness my hand and official seal the
day and year last above written. F. J. Tripp,
Notary Public. (Notarial Seal.)"
The objection to the certificate of acknowledgment
is that the officer making it does not certify that the
persons w^ho acknowledged the execution of the assign-
ment were known to him to be the president and sec-
retary of the corporation.

The statutes of this state (Comp. Laws) contain
the following provisions:

"Sec. 3281. The acknowledgment of an in-
strument must not be taken, unless the officer tak-
ing it know^s, or has satisfactory evidence, on the
oath of affirmation of a credible witness, that the
person making such acknowledgment is the in-
divual who is described in and who executed the
instrument; or, if executed by a corporation, that
the person making such acknowledgment is the
president or secretary of such corporation."

"Sec. 3288. An officer taking the acknowl-
edgment of an instrument must indorse thereon
or attach thereto a certificate substantially in the
forms hereinafter ])rescribed. * * * (2) The
certificate of acknowledgment of an instrument
executed by a corporation must be substantially in

the following form: 'State of , County of

, ss. : On this day of in

the year , before me (here insert the

and quality of tlie officer), ])erso:ially a])])eared

, known to me (or proved to me on the

oath of ) to be the president (or secre-
tary) of the corporation that is described in and
that execnted the within instrument, and ac-
knowledged to me that such corporation executed
the same.' "

"It is clear that a certificate of acknowledg-
ment must substantially conform to the require-
ments of the statute."

Such is the language of the statute, and the holding
of this court. Cannon vs. Deming, 3 S. D. 421, 53
X. ^V. 863. The form prescribed for instruments ex-
ecuted by corporations requires a certificate that the
person who makes the acknowledgment is known or
proved to be the president or secretary of the cor-
])oration; and the preceding section of the statute posi-
tively prohibits an officer from taking the acknowl-
edgment of an instrument, if executed by a corpora-
tion, unless he knows or has satisfactory evidence, on
the oath or affirmation of a credible witness, that the
person making the acknowledgment is the president or
secretary of such corporation. The essential fact to be
known by or ])roved to the certifying officer is that the
person appearing before him is the president or sec-
retary of the corporation. If he does not know this
fact, the only evidence he can receive is the oath or
affirmation of a credible witness. Therefore, he cannot
act upon any presumption arising from the recitals or
seal of the instrument itself.

"In this case the officer certifies that Sampson

and French are knoicn to he the identical personn
whose names are subscribed to the instrument as
president and secretary of the corporation." "This
is far short of a certificate that they are known to
be the president and secretary of the corporation/'
"He might have made this certificate truthfully,
well knowing that they were not in fact officers
of the corporation. The evident intent of the law
is to prevent persons from representing themselves
to be officers of corporations when they are not.
The certificate does not substantially comply with
the statute, the assignment was not so acknowl-
edged and certified as to entitle it to be recorded,
and the order of the circuit court overruling de-
fendant's demurrer to tlie complaint is affirmed."

In Gage vs. Wheeler, 21 X. E. 1075 (111.) the
Supreme Court says:

"But acknowledgments to conveyances to real
estate can only be made when the grantor is per-
sonally known to the officer taking such acknowl-
edgment to be the real person who and in whose
name such acknowledgment is proposed to be
made, or shall be proved to be such by a credible
witness; and the fact of such personal knowledge
or proof must be stated by such officer in the cer-
tificate of acknowledgment (Section 24, c. 30 Id.)
the form of wliich certificate is given in Section
26 of the same chapter."

"Here the certificate failing to show that the
grantors were jjersonally known t;) tlie officers, or

that they were proved to him by a credible wit-
ness are fatally defective. Tully vs. Davis, 30 111.
103; Fell vs. Young, 63 111. 106; Shephard vs.
Carriel 19, 111. 313. The instruments are, there-
fore, of no greater force if no attempt had been
made to acknowledge them."
In Bennett vs. Knomles, 68 N. W. Ill (^linn.)
the Supreme Court says:

"Where the deed or other instrument is exe-
cuted by or on behalf of an individual, there is but
little difficulty in establishing before the officer
the identity of the party described therein, and who
executed it, for, as a rule, such fact is personally
known to such officer, but where the deed is exe-
cuted by a corporation the difficulty is greatly in-
creased. The acknowledgment for the corporation
can only be made by some officer or representative
who has authority to execute such instrument in
its behalf,— in fact not generally within the per-
sonal knowledge of the officer taking the ac-
knowledgment. It is nevertheless essential to the
validity of such acknowledgment that it appear
prima facie from the officer's certificate, when
read in connection with the deed, that the person
making the admission or acknowledgment as to the
execution thereof was authorized to execute it for
the corporation. If the certificate fails in this par-
ticular, the proof of the execution fails, precisely
as it would in the case of the deed of an individual
if the officer failed to certify as to the identity of
the party acknowledging it." 'Tf the acknowledg-

ment here in question had followed the statutory
form, there could be no question as to its suffi-
ciency. It would then have appeared on the face
of the officer's certificate, prima facie, that the
person making the acknowledgment was authorized
to execute the instrument for the corporation. Gen.
St. 1894, Sec. .5650. This statute, while it is not
mandatory, and need not be strictly followed, yet
it prescribed a certain and practicable method of
making proof of the execution of a deed by a,
corporation before the proper officer, and certify-
ing the same on the instrument so that such cer-
tificate or acknowledgment will prima facie prove
the execution of the deed." "If any other form is
adopted, the certificate must state all that is neces-
sary to show a valid acknowledgment. No material
fact can be omitted.
********

"The parties to the deed are designated there-
in as the Xew Columbia Athletic Club, party of
the first part, and the i)laintiff as the party of the
second part. The conclusion and signatures are as
follows: 'In testimony whereof, said party of the
first part has hereunto set their hand and seal the
day and year above written. The Xew Columbia
Athletic Club. (Seal) W. A. Dunlao, President.
(Seal).' Then follows the certificate of acknowl-
edgment, which, omitting the venue, and official
signature and seal, is in these words:

"On tlie l.)th (lav of Julv, A. D. 189,5,-- before

me, a notary public within and for said colnty,
personally appeared W. A. Dunlap, who acknowl-
edged that he is president of the within corpora-
tion, and that he signed the foregoing deed as its
president and that he has been duly authorized to
sig-n the same by the board of directors of said cor-
poration, to me known to be the person described
in, and who executed, the foregoing instrument,
and acknowledged that he executed the same as
his free act and deed." ''It is to be observed that
the of fleer taking the aeknotdedgment certifies
that JV. A. Dunlap appeared and acknowledged
that he is president of the corporation, and signed
the deed as such, and that he was authorized by
the directors to sign the same; that is, he admits or
acknotdedges these facts before the officer, but he
does not prove them by his oath, as the statute
requires. Neither does the officer certify that
Dunlap is known to him to be such president, and
authorized to e.vecute the deed for the corpora-
tion.

We call the Court's attention to the fact tliat the
last case above (]uoted from and the one at bar are
very similar; very much alike in that the statute is al-
most identical witli the statute of Washington, and that
the certificate of acknowledgment is like the one in
question. The court is positive that the instrument
is void, because of the lack of authority to execute it,
for in that case, as here, the officer does not on his
oath state that he had authority to execute the in-

strument; and the officer who took the acknowledg-
ment there, as here, does not certify that the officer
executing the instrument was personally known to be
that identical officer.

THIRD A.

Because tJiat even if the mortgage could he held
valid as a real estate mortgage, it is void as a chattel
mortgage, because it teas not recorded as a chattel
mortgage in the office of the auditor of Pacific Countif,
Washington.

(See stipulation on page 88 of Transcript on the
point that the instrument was never recorded as a chat-
tel mortgage.)

Section 3668 of Rem. k Bal. Code of Washington,
which is Section 4559 of Ballinger's Code, provides as
follows :

"A mortgage of personal pro])erty must be
recorded in the office of the county auditor of
the county in ^\\\\q\\ the mortgaged property is
situated, in a book kept exclusively for that pur-
pose."

That section of the code was passed by the legis-
lature of said state in 1879, and the same has ever since
that time been in force and effect.

The laws of 1889, requiring a chattel mortgage
to be only filed in the county auditor's office, relates
only to mortgages for $300.00 or less, but all mortgages
in excess of $300.00 must he recorded, and if not re-

In our opinion these cases have never heen over-
ruled and the construction placed on the statute by
the above decisions is still the law of this state.

Urquhart iw. Cross, 60 ^Vash. 249, cited by ap-
jjellant was a case where the court held that the trans-
fer of the possession and title of mortgaged chattels to
a bona fide mortgage, in satisfaction of the debt, is
valid against an attachment by a subsequent creditor
without regard to the validity of the mortgage.

It was a case where the mortgagor had trans-
ferred the title and possession of the projDertj' de-
scribed in the void mortgage, })rio]- to the time that the
creditor attached, sa that when he attached the prop-
erty, neither the title nor ])ossession of the property
was in the mortgagor.

Great stress is placed by the appellant's brief upon
several cases decided by the Supreme Court of Wash-
ington in which defective acknowledgments were sus-
tained as being in substantial compliance with the
statute. A careful reading of these causes will show
that there had been under the alleged defective instru-
ment, either a change of possession or an intervention
by vested rights. One of the most important features
of this case, to be constantly borne in mind, is that the
appellant bank at no time had either real or constructive
possession of the property described in the mortgage,
but that immediately upon tlie adjudication of bank-
ruptcy the trustee to.)k. ever since and now has full,
actual and manual possession of all of the property of
the bankrui.t described in the mortgage. (Record,
page 89.)

We therefore earnestly maintain that the law as
enunciated in the decisions in 16 Wash. 499, and in 12
Wash. 190, 40 Pac. 729, is the law of the State of
Washington, for in those cases the point discussed
here was there in issue and decided. •

The law of these cases is based on the better
reason, because, otherwise a secret lien may exist on
property, and persons dealing with the owner and be-
coming his creditors, on the strength of his ownershi]?,
would be defrauded, if the statute only related to and
protected only creditors who were such when the in-
strument was executed.

This mortgage not having been recorded as a chat-
tel mortgage, was and is void as to the creditors who
become such after the execution of the mortgage, be-
cause they not knowing of the existence of the mort-
gage parted with tlieir money and gave it to the bank-
rupt corporation, on the strength of, and believing its
property to be unincumbered.

In Dunsmuir vs. Port Angeles Gas Etc. Co., 24
Wash., 104, the Supreme Court of the State of Wash-
ington says:

"Our statute provides that a mortgage of
personal property is void as against creditors of
the mortgagoi*s or subsequent purchasers and in-
cumbrances of the property for value and in
good faith, unless it is accompanied by the affida-
vit of the mortgagor that it is made in good faith
and without any design to hinder, delay or defraud
creditors, and is acknowledged and recorded in the

corded it does not impart notice to creditors.

In Merritt vs. Russell ^ Co., 44 Wash. 143, 87

Pac. 70, the Supreme Court of Washington said:

"Whether or not tliis is true must depend
upon the question as to whether or not said Sec-
tion 4559 of Bal. Code being section 3668 of Rem.
& Bal. Code is repealed by the act of 1899. The
latter act not purporting to cover the entire sub-
ject matter of the former statute, and having no
repealing clause, and repeals by implication not
being favored, it follows tliat the provision in
Section 4559 for the recording of the mortgage in
the county to which the property has been re-
moved is still in force, unless there is something
in the act of 1899 repugnant thereto. We find
m the latter act no such inconsistent provision.

"Therefore, the appellant not having within
thirty days after the removal of the property from
Whitman to Spokane County caused the mort-
gage to be recorded in the latter county, and not
having within said period taken possession of the

same, its lien thereupon, as against these respond-
ents who purchased the property in good faith

and without knowledge of the mortgage, became

ineffectual."

By referring to the Session Laws of 1899 of
Washington, Section 6, being Section 3665 of Rem. k
Bal. Code, it will be observed that the act of 1899 only
refers to chattel mortgages for $300.00 and less. See
also the notes to Sec. 3659 of the latter code by the
compiler.

See also FeuJn/ vs. Hunt, 53 Wash. 127, 101 Pac.

492.

Chattel mortgages for more than $300.00 must
under said Section 3668 of Rem. & Bal. Code, be re-
corded in a book kept exclusively for that purpose in
the office of the auditor of the County where the per-
sonal property is situated, and recording in the real
estate mortgage records is not constructive notice.

Duusjuiiir vs. Port Augclcs Gas Compani),

24 Wash. 104.
Manhattan Trust Com pan ij vs. Seattle Coal

Company, 16 Wash. 499.
Radehoiigh vs. Tacoma S: etc. Fij. Company,

8 Wash. .570.

Subsequent to the decision of Roy vs. Scott, 11
Wash. 399, relied upon by appellant, as sustaining the
doctrine that the statute did not make the instrument
void where it was not recorded, as to persons, who be-
came creditors subsequent to the execution of the mort-
gage, the Supreme Court of the State of 'Washington,
in several cases decided positively and unequivocally
that the Statute did cover and does make void an un-
recorded chattel mortgage as to persons tcho became
creditors subsequent to the Ccvecution of the mortgage.
These later cases referred to are:

Manhattan Trust Co. vs. Seattle Coal &^ Iron

Co., 16 Wash. 499.
Willamette Casket Co. vs. Cross Undertaking

Co., 12 Wash. 190, 40 Pac. 729.

same manner as is reciuired by law in conveyance
of real property. 1 Hill's Code, Sec. 1648; Bal.
Code. Sec. 4o.58. And it is further provided that
sucli mortgage must be recorded in the office of
the county auditor of the county in which the prop-
erty is situated, in a book kept exclusively for that
purpose. 1 Hill's Code, Sec. 1649; Bal. Code, Sec.
4559. The respondent's mortgage, it is conceded,
was recorded in the records of real estate mort-
gages only, and if, as appellant contends, it is a
mortgage of personal property, the record im])art-
ed no notice to appellant, and it will not be neces-
sary to determine any question other than that
presented by the third assignment of error."

Those icho became creditors of the bankrupt, sub-
sequent to the e.vecution of the mortgage, may attack
the mortgage, as the statute protects such creditors,
against a mortgage such as the one in issue.

In Wilhimette Casket Co. vs. Cross etc. Co., 12
Wash. 190, the Court said:

"That part of said section material to this
question is as follows:

'A mortgage of personal property is void as
against creditors of the mortgagor or subsequent
purchaser, a-d incumbrances of the property for
value and in good faith, unless * * * it is
* * * recorded in the same manner as is re-
quired by law in conveyance of real property.'

'Wud if the language used be given its or-
dinarv sicrnificance, it would seem to fully warrant

such contention. It is claimed, however, by the
respondent, that only such creditors are protected
by the provisions of this section as before the
time of the recordnig of the mortgao-e have ob-
tained some specific lien upon the property."
"But such construction would do violence to the
language used. The statute makes no distinction
as to the creditors who are to be protected, and
we see no good reason for holding that one class
rather than another was intended. One is as much
a creditor before his claim has been make a specific
lien upon certain property as after, and for that
reason an unsecured creditor is as well describcil
by the language of the section as one who had
procured a specific lien as security for his claim."
"The intention of the legislature was to prcjtect
those who should give credit upon the faith of
property owned by one to whom it was exteaded,
and to give force to siwh intention the term
'creditors/ as used in the act, must he held to cover
all classes of creditors/'

''Tlie cases cited by the appellant from this
court, while not directly in point, are sufficiently
so to justify their citation in supijort of the con-
tention. The cases so cited are BaiVten vs. SmitJi.
2 Wash. T. 97 (4 Pac. 3.5); Darland vs. I.evius,
1 Wash. 582 (20 Pac. .309) ; Hall vs. 3Iatthetcs, S
Wash. 407 (36 Pac. 232) ; and Radehaugh vs.
Tacoma & Pui/aUup R. R. Co., 8 Wash. .570 (36
Pac. 460)." "TJ/e language of the statute, and

these (nithorities, satisfi/ ii.s that il teas lite inten-
tion of the legislature to give no preference to a
chattel mortgage over the claims of creditors who
should become such after its execution, unless it
was recorded within a reasonable time after its ex-
ecution, that the mortgage in question was not
recorded within such reasonable time."

"As to wliether or not creditors whose claims
existed at the time the mortgage was executed
could take advantage of the failure to record, it
is not necessary for us to decide, for the reason
that, as we have seen, the court found that these
creditors became such after the date of the mort-
gage. If the mortgage was thus inoperative as
to creditors, we do not think it will be seriously
contended that it would not be inoperative as to
the receiver as their representative; for while it
is true he also represents the corporation itself,
yet his appointment prevented them from pro-
tecting themselves and must be held to have fully
protected their rights."

In Manhattcn Trust Co. vs. Seattle Coal S^ Iron
Co., 16 Wash. 499, the court says:

"A mortgage of personal property must be
recorded in the office of the county auditor of the
county, in which the mortgaged property is sit-
uated, in a book kept exclusively for that pur-
pose."

"The plain, literal meaning of these sections
is against the contention of ])laintiff that it has

any lien whatever upon the personal property in
the possession of the receiver as against these
petitioners. There is no evidence whatever that
the petitioners had any notice of the existence of
any chattel mortgage in favor of the plaintiff.
Counsel for plaintiff and receiver argued that, as
petitioners, as creditors, have not negatived notice
or knowledge on their part, it should be inferred
against them; but this would be a novel rule and
one that we have never seen applied. Such al-
legation and proof of notice should come from
the one claiming the personal property under the
alleged mortgage. But we are not prepared to
decide that in any view there could be here a
chattel mortgage as against these creditors."

"In Willamette Casket Co. vs. Cross Under-
faking Co., 12 Wash. 190 (40 Pac. 729) this court
held a mortgage void as to subsequent creditors,
which was not recorded in a reasonable time after
its execution. The court said:

'The language of the statute, and these au-
thorities, satisfy us that it was the intention of the
legislature to give no preference to a chattel mort-
gage over the claims of creditors who should be-
come such after its execution, unless it was re-
corded within a reasonable time after its execu-
tion.' Ba.rter vs. Smith, 2 Wash. T. 97 (4 Pac.
35); H inch man vs. Point Defiance Ri/. Co., 14
Wash. .349 (44 Pac. 867) ; Mendenhall vs. Kratz,
14 Wash. 453 (44 Pac. 872) ; liadehaugh vs. Ta-
coma, etc. R. R. Co., 8 Wash. 570 (36 Pac. 460)."

THIRD B.

It luauKj been established by the faets and the au-
thorities set out heretofore in tJiis brief that the mort-
gage is void, because it teas not acknowledged as re-
quired by the statute, and because it teas never recorded
as a chattel mortgage, we noiv contend:

Tliat general creditors of the bankrupt who became
such sitice the cvecution of the mortgage, could have
attacked the mortgage, if the corporation had not been
adjudged a bankrupt, and that note the trustee in
bankruptci) being in possession of the property, may
on behalf of such creditors attack the validity of the
mortgage.

Manhattan Trust Co. vs. Seattle Coal & Iron

Co., 16 Wash. 499.
Willamette Casket Co. vs. Cross Undertaking

Co., 12 Wash. 190.
I Loveland on Bankruptcy (4th Ed.) Sec.

372 also Sec. 371.
Knapp vs. Milwaukee Trust Co., 216 U. S.

545-54 Law Pjd. 610.
In Be Brazlmore, 189 Federal Rep. 236.
In re Pekiyi Plow Co., 112 Fed. 308.
In re Beede, 126 Fed. 853.

The rule contended for hy appellant on pages 15
and 16 of its hrief, is not the law, especially under the
amendment of the hankruptcy act of June 25, 1910.
The object of the amendment was to protect general
creditors of the bankrupt as well as those having liens
by judgment or attachment against the property of

the bankrupt.

The amendment provides that "such trustees, as
to all property in the custody or coming into the
custody of the bankruptcy court, shall be deemed
vested with all the rights, remedies, and powers of a
creditor holding a lien by legal or equitable proceed-
ings thereon; and also, as to all property not in the
custody of the bankruptcy court, shall be deemed
vested with all the rights, remedies, and powers of a
judgment creditor holding an execution duly returned
misatisfied;"

Section 8 of the Act of June 25, 1910, amending
Sec. 47a of the Act of 1898.

I Loveland on Bankruptcy (4th Ed.) Sec. 372,
page 768, it is said:

"It will be observed that it is section 47a. re-
lating to the collection of assets, and not section
70a, vesting title in the trustee that is amended.
For the purpose of reclaiming property for the
estate the trustee is given the rights, remedies and
powers of a lien creditor with res])ect to property
in custodia legis; and those of a judgment creditor
holding an execution duly returned unsatisfied
with respect to property not in custodia legis, in
lieu of the rights of a general creditor to which
he was limited prior to this amendment."

"The trustee may be said to now stand in the
shoes of the bankruijt, clothed with the rio-hts,
remedies and ])owers of a lien creditor and a
judgment creditor instead of a general creditor as

before the amendment. He maj' now challenge
any security or conveyance that a lien creditor or
a judgment creditor might challenge had bank-
ruptcy not intervened. But a lien which is valid
under the state law as against the claims of such
creditor is valid under the bankrupt law as against
a trustee since the amendment as well as before it."
In Re Brazemore, 189 Fed. Rep. 2.36, it is said:
"The class of cases, unprovided for, by the
original act. and intended to be reached by the
amendment, Mere those in which no creditors had
acquired liens by legal or equitable proceedings
and to vest in the trustee for the interest of all
creditors the protential rights of creditors of that
class. The language is readily susceptible of this
construction." "It recites that such trustee shall
be deemed vested with all the rights, remedies and
powers of a creditor holding a lien by legal or
equitable proceedings thereon. This language
aptly refers to such rights, remedies, and powers
as a creditor holding such a lien is entitled to under
the law, rather than to the rights, remedies and
])owers of a creditor who had actually fastened a
lien on the property of the bankrupt estate."
In 1 Loveland on Bankruptcy, Section 371 the
author says:

"The trustee is vested 'by o])eration of law
with the title of the bankrupt, as of the date he
was adjudged bankrupt, except in so far as it is
to property which is exempt.'

4()

"The trustee takes the title that the bankrupt
had at the date of adjudication, and also the
title that the bankrupt had to property fraud-
ulently conveyed or encumbered at tlie time of the
fraudulent transaction."

"It may be said generally that the trustee
stands in the shues of the bankrupt, and the prop-
erty in his hands, miless otherwise provided in the
bankrupt act, is subject to all of the equities im-
pressed upon it in the hands of the bankrupt. He
takes the property of the bankrupt, not as an in-
nocent purchaser, but as the debtor had it at the
time of the petition subject to all valid claims,
liens and equities. Bankruptcy does not suspend
the jurisdiction of equity to correct errors in writ-
ten contracts caused by mutual mistake. What
are valid claims, liens and equities is considered
at length in another place."

"This general rule j3revailed under the former
act. It has been the rule under the present act
and is not changed by the amendment of 1910,
tjchich gives the trustee additional 'rights, remedies
and potcers' to avoid liens, transfers and eonvey-
ances, as will he presently pointed out"

"Special provisions of the act place the title
to certain property, encumbered with liens or
transferred by the bankruj^t, in the trustee and
give him the power to avoid the same. Such trans-
fers and encumbrances may be good as against
the bankrLi])t. In some cases the creditors might

have set them aside, and in other cases they could
not do so, had bankruptcy not intervened." "The
trustee may he said to stand in the bankrupt's
shoes with additional pozcers conferred h'y special
provisions of the act.

"Bij these special provisions the trustee in
bankruptcy is vested by the operation of law with
the title the bankrupt had to all property trans-
ferred by him in fraud of creditors, or as a pref-
erence, or where the transfer or incumbrance is
void as to creditors by the laws of the state, terri-
tory or district in which the property is situated.
Property suliject to hens created tlirough legal
proceedhigs within four months prior to the filing
of the petition, passes to the trustee as a part of
the state free of the lien, unless the court subro-
gates him to the right of the creditor holding the
lien."

"These pnrcisions confer on tJte trustee the
title to the property mentioned and give him
poKCr to avoid the conveyance or encumbrance
and reclaim the property for the estate. To this
end lie is vested icith all the rights, remedies and
powers of a lien creditor with respect to property
in custodia legis, and uith those of a judgment
crediior holding an e.vecution duly returned un-
satisfied with respect to property not in custodia
legis."

In First Loveland on Bankruptcy (4th Ed.), Sec-
ti ;n 484 it is said:

"The validitv and extent of a lien on the prop-

erty of a bankrupt is determined by the local law
as construed by the highest courts of the state.
* * * The validity and extent of a lien cre-
ated "by a transfer of property by way of mortgage,
deed, bill of sale, conditional sale, pledge, or other-
wise presents a question of local law."

It will be observed from the authorities heretofore
cited in this brief that this mortgage was not ac-
knowledged as required by the laws of the State of
Washington, and consequently it is invalid as a real
estate mortgage, and it was not recorded as a chattel
mortgage and consequently it is invalid as a chattel
mortgage. It will also be observed that by the deci-
sions of the supreme court of tlie State of Washing-
ton, creditors who become such, subsequent to the ex-
ecution of tlie mortgage may attack the validity of
the mortgage. See the cases heretofore cited, namely:

Manhattcu Tni.st Co. vs. Seattle Coal Co., 16

Wash. 499.
Willamette Casket Co. vs. Cross Undertaking

Co., 12 Wash.T90, 40 Pac. 729.

In Kiiapp vs. Milrvaukee Trust Co., 216 U. S.
545-54, Law Ed. 610 particularly page 615, the court
says :

"But it is said the trustee in bankruptcy may
not defend against these mortgages. It is con-
tended that they are good as between tlie })arties,
and that, as to them, the trustee in bankruptcy
occupies no better position than the ])ankrupt.

Tliis (juestion was raised aiul decided in Security
JVarehousing Co. vs. Hand, 206 U. S. 415, 51
I., ed. 1117, 27 Sup. Ct. Rep. 720, 11 A. & E.
Ann. Cas, 789, That case arose in \Visconsin, and
it was therein held that under the law, an attempted
pledge of property, without change of possession,
was void under the laws of that state. In that
case, as in this one, the question was raised as to
whether the trustee in bankruptcy could question
tlie transaction, and it was contended that, being
valid as between the parties, the trustee took only
the right and title of the bankrupt. Tlie ques-
tion was fully considered therein, and the previous
cases in this court were reviewed. The principle
was recognized and that the trustee in bankruptcy
stands in the shoes of the bankrupt, and that the
property in his hands is subject to the equities
impressed upon it while in the hands of the bank-
rupt."

"But it was held that the attempt to create a
lien upon the property of the bankrupt was void as
to general creditors under the laws of Wisconsin.
Applying Sec. 70a of the bankruptcy act. it was
held that the trustee in bankruptcy was vested by
operation of the bankrupt law with the title of
the property transferred by the bankrupt in fraud
of creditors, and also that the trustee took the
property wliich, prior to the filing of the petition,
might have been levied upon and sold by judicial
process against the bankrupt. It was therefore

held that, as there had heen no vahd pledge of
the property, for want of change of possession, it
could have been levied upon and sold under judicial
process against the bankioipt at the time of the
adjudication in bankruptcy, and passed to the
trustee in bankruptcy."

"The principles announced in Security Ware-
housing Co. vs. Hand, supra, when applied to the
present case, are decisive of the question here
presented. Under the Wisconsin statutes and de-
cisions of the highest court of that state the con-
ditions contained upon the face of this mortgage
were such as to render it fraudulent in law and
void as to creditors, and prior to the filing of the
petition in bankruptcy the property might have
been levied upon and sold by judicial j^rocess
against the bankrupt."

"The suggestion in appellant's brief, that the
trustee in bankruptcy may possibly recover against
directors and officers of the corporation for der-
eliction of duty, and against stockholders for un-
paid subscriptions an additional liability on their
part, presents no reason why he may not resist
an attempt to take all the available property in
his hands to apply on a mortgage void as to credi-
tors at the time of the adjudication."

"We are of opinion, for the reasons stated, that
the mortgages in question are void, and that, under
the bankruptcy law, the trustee can assert their
invalidity."

In Mitchell vs. Mitchell, 14T Fed. 281, which was
a case where creditors who became such subsequent to
the execution of a chattel mortgage, the court said:

"The bankrupt law instead of vesting in the
trustee the remedies of the creditors against the
property judgment, execution, and creditor's bills,
vests in him at once the title to the property —
makes him the owner."

"It is argued that the mortgage in controversy
being good as between the parties is also good
as between the mortgagees and trustee in bank-
ruptcy of the mortgagor; but the rule is well
settled that the trustee represents the rights of
creditors, and may attack conveyances made by
the bankrupt in fraud of creditors." "It is so
provided in the statute. The trustee may prose-
cute anv suit to recover assets in the hands of third
parties, or to enforce the payment of claims that
could have been prosecuted by the creditors them-
selves had no proceedings in bankruptcy been in-
stituted."

THIRD.

// is argued in aiypeU ant's hrief that justice requires
the sustaining of the mortgage, hut in this respect tee
differ from the appdlant and insist that the equities
are not mth the appellant.

Referring to the affidavit of Samuel JNIcMurran,
found on page 57 of the transcript, and the affidavit
of T^Iiles H. Leach, found on page 59 of the transcript,

it is but fair to assume that this mortgage was given
by the bankrupt corporation to the appellant to secure
a pre-existing debt which the bankrupt owed appel-
lant, consequently appellant does not come within the
definition of an incumbrancer for value and in good
faith as that term is defined by the laws of the State
of Washington.

Hicks vs. National Surctij Co., .50 Wash. 16.
In the above case the court said:

"That this statute makes a broad distinction
between creditors and subsequent purchasers or
incumbrancers. As to the former it positively
declares that chattel mortgages are void unless they
are accompanied by the specified affidavit and
are acknowledged and recorded as required by law.
But an incumbrancer or subsequent purchaser,
in order to avail himself of an omission of the
affidavit, or of a failure to acknowledge or record
the instrument, must be able to show that he is an
incumbrancer for value and in good faith."

Mendenhall vs. Kratz, supra.

"The instrument under which appellant claims was
taken as security for a pre-existing debt or a pre-exist-
ing contingent liability. Under such circumstances
does it come within the definition of an incumbrancer
for value and in good faith, as that term is defined in
law^ Under the great weight of authority it does
not."

Finally, upon the law of the entire caye and all
questions arising here, we confidently cite the two

written opinions of Judge Hauford, an eminent au-
thority wlio adorned the Federal bench for more
than two decades. (Record, pages 92-101.)

We submit that the judgment of the district court
should be affirmed and the appellees should recover
their costs and disbursements herein.
Respectfully submitted,

CHARLES E. MILLER,
Attorney for A. S. Coates, as Trustee of
Raymond Box Compan5^ bankrupt, ap-
pellee.

Address, South Bend, Washington.
JOHN T. WELSH,
MARTIX C. WELSH,
Attorneys for Answering Creditors,
Appellees.
Address, South Bend, Washington.

IN THE ^

United States Circuit Court
Of Appeals

FOR THE NINTH CIRCUIT

THE PACIFIC STATE BANK, a
corporation,

Appellant,
VS. .

A. S. COATES, as Trustee in Bank-
ruptcy of Raymond Box Company,
a corporation, bankrupt.

Appellee.

APPEAL FROM THE DISTRICT COURT FOR
THE WESTERN DISTRICT OF WASH-
INGTON, SOUTHERN DIVISION.

REPLY BRIEF OF APPELLANT

In the statement of the case by appellees, it is
said that the promissory note and mortgage were
given for a pre-existing indebtedness. (Paragraph
4, page 4.) This statement is not correct, as ap-

pears by the record, as will be hereafter shown.
The statements contained in Paragraph 13, on
page 7, of appellees' brief, are not, as we contend,
true. The facts in this regard are to be ascer-
tained from the affidavit of Mr. Leach (page 68,
Transcript) and the findings and judgment of the
Superior Court of the County of Pacific in the
case of McKenzie, Administrator, vs. J. Albert
Heath. (Trans., page 69, and Stipulation of Facts,
page 86.)

ARGUMENT.

Under the second head of their brief, appellees
contend that the purported mortgage is void be-
cause the notary who took the acknowledgment does
not certify that the persons who executed it were
known to him to be the officers of the corporation,
and because the certificate does not show that the
officers who executed the instrument were sworn.
In discussing this question the appellees contend
that the statute authorizing a form therein set
out as a form for corporate acknowledgment is
repugnant to the general statute relating to ac-
knowledgment of instruments, and is exclusive and
mandatory, but they cite no authorities in support
of their position.

As we pointed out in our opening brief, the
Supreme Court, in the case of Kley v. Geiger, 4
Wash. 484, has held that a form provided by the

statutes of Washington for individual acknowl-
edgments, and stated by the statute to be suffi-
cient, is not an exclusive form. The language of
Section 87611/0, Remington & Ballinger's Code,
containing a form for corporate acknowledgment,
does not upon its face make that form exclusive,
but says it shall be sufficient. The form considered
in Kley v. Geiger did not comply with the form set
out in Section 8761, Remington & Ballinger, which
is stated therein to be sufficient. We believe it
follows that the Supreme Court of this state would
hold, and in effect have held, that the form set out
in 876 IV2 is an optional form only. See also:

Bennett v. Knoivles, 68 N. W. 111.

Boswell V. First Nafl Bank, 92 Pac. 631.

Counsel has diligently collected the cases from
different jurisdictions decided under varying
statutes and varying circumstances and relations
of the parties wherein the particular acknowledg-
ments are held to be insufficient, and deduces there-
from that the courts are "unanimous" in holding
such acknowledgments, and the instruments to
which they are attached, void. Of course, this
statement of counsel cannot be taken as correct,
since, as stated in Cyc, Vol. 1, page 513, "except
where the statute expressly makes acknowledgment
essential to the validity of the instrument, it is
universally held that an acknowledgment is no part
of the contract between the parties, and the instru-

ment is valid without it," and since the Supreme
Court of the State of Washington has in numerous
cases held that deeds, mortgages, chattel mortgages
and bills of sale are valid between the parties,
whether acknowledged or not. See cases quoted
on page 22 of our brief. See also:

Hicks V. National Surety Co., 50 Wash. 16.
Chase v. Tacoma Box Co., 11 Wash. 377.
Roy V. Scott Hartley & Co., 11 Wash. 399.
Mendenhall v. Kratz, 14 Wash. 453.

The cases cited from other states do not give
much light on the case at bar because this is purely
a question of Washington law under Washington
statutes, but an examination of the decisions gen-
erally shows that the policy of the State of Wash-
ington to render valid and to give force and effect
to all conveyances voluntarily and in good faith
signed by the grantors, and not to render such
deeds ineffectual in consequence of an informality
or defect as to the proof of their execution {Carson
V. Thompson, 10 Wash. 295) is generally followed
by a large majority of the courts of last resort.

In Cyc, Volume 1, page 582, it is stated:

"It is a rule of universal application that a literal
compliance with the statute is not to be required
for a certificate of acknowledgment, and that if it
substantially conforms to the statutory provisions
as to the material facts to be embodied therein it
is sufficient. * '■' * It is the policy of the law

to construe them liberally and not to allow a con-
veyance to be defeated by unsubstantial objections
to the certificate of acknowledgment."

See also Summer v. Mitchell, 29 Florida 109, 10
So. 562, 14 L. R. A. 815, where it is stated that "all
technical omissions will be disregarded," and that
"it should be the aim of the courts to preserve
and not to destroy."

Out of the multitude of cases which illustrate the
liberality of courts in sustaining the instrument,
disregarding formal facts, we refer to the follow-
ing:

An acknowledgment reciting that the president
and secretary acknowledged the instrument as their
voluntary act and deed, is held sufficient.

Eppright v. Nicker son, 78 Missouri 482.
Tenny v. East Warren Lumber Co., 43 N. H.
343.

McDaniels v. Floiver, 22 Vermont 274.

An acknowledgment on behalf of a bank by the
president and cashier wherein they acknowledge
that they executed the instrument for the purposes
and considerations there contained, held sufficient
to show that the instrument is the instrument of
the corporation.

Midler v. Boom, 63 Texas 91.

Under a statute requiring the certificate to state
substantially that the person making the acknowl-
edgment is known to the officer, a certificate re-

citing ''personally appeared J. T. Bates, tax collector
of said county, to me well known and acknowl-
edged," and signed J. T. Bates, Tax Collector, is
held to be a substantial compliance with the statute.

Schleicher et al. v. Gatlin, Texas, 30 S. W. 120.
See also,

Zimpleman v. Stamps, 51 S. W. 341.

In the case of Fitch v. Lewiston Steam Mill Co.,
12 Atlantic 732, from the acknowledgment it ap-
peared that "Jas. Wood, treasurer, personally ap-
peared and acknowledged the above instrument to
be his free act and deed." This was sustained as
the acknowledgment of the corporation, and the
case of Tenny v. East Warren Lumber Co. was
cited approvingly.

As to the general policy of the courts in sustain-
ing acknowledgments, see also Boswell v. First
National Bank, 92 Pac. Opn. 631. In the last cited
case it is held that a statement in the certificate
that the subscriber personally appeared, necessarily
implies that he was personally known.

That the instrument acknowledged may be re-
sorted to for support to the acknowledgment, see
Shimmer v. Mitchell, 29 Florida, supra, and Cyc,
Volume 1, page 584, and Lea v. Polk Co. etc., 75
U. S. 513. There is not any substantial conflict
on this point.

Aside from the contention that the form given

in the statute is exclusive, the case of Banner v.
Rosser, Virginia, 31 S. E. 67, Opn. 72, is in all
essential respects on all fours with the instant case.
It was there claimed that the acknowledgment was
insufficient because the notary's certificate did not
certify that the person acknowledging was the pres-
ident of the corporation. The court said, however:

'The deed * * * was signed by the Minne-
apolis Improvement Co., by Thomas Rosser, pres-
ident, with the corporate seal affixed and the certifi-
cate of the notary states that 'Thomas Rosser, pres-
ident, whose name is signed to the writing hereto
annexed, bearing date of the second day of Decem-
ber, 1891,' acknowledged the same before him in
his county. It identifies the subscriber, specifies the
writing subscribed, states the capacity in which he
executed it and certifies his acknowledgment there-
of. The foregoing contains all that is necessary.
See Bank v. Goddin, 76 Virginia 506."

State V. Coiighran, 19 S. D. 271.

Counsel for appellees rely upon two Washington
cases holding that leases are invalid because they
are not acknowledged.

Forrester v. Reliable Transfer Co., 59 Wash.
86.

Anderson v. Frye & Briihn, 69 Wash. 89.

It will be conceded that the Supreme Court of
this state have so held under the peculiar wording
of the statute relating to leases, but this is not
the statute under which the instrument in contro-
versy is to be construed, either as a chattel mort-

gage or as a real estate mortgage, and, as we
pointed out in our opening brief, the Supreme Court
have uniformly sustained both real estate mortgages
and chattel mortgages as between parties without
any acknowledgment at all. See cases cited on
page 52 of our brief, and see

Hicks V. National Surety Co., 50 Wash. Op. 18,
and cases therein cited.

Counsel has not found any cases decided by our
Supreme Court where instruments have been held
void by reason of defective acknowledgments, though
they have found two cases under a statute with
relation to leases, holding them invalid even as
between the parties, where they are wholly lacking
in acknowledgment; but we believe it to be entirely
established in this state that deeds and mortgages,
whether real or chattel, are good, at least between
the parties, without any acknowledgment, and fur-
ther, that this state has gone as far as any state
in sustaining defectively acknowledged instruments
as against third parties.

We have fully discussed in our opening brief the
policy of the statutes and decisions of this state in
sustaining acknowledgments (p. 23 et seq.), and
have quoted in full (p. 24) Section 8784, Remington
& Ballinger's Code (taken from Act of 1881 re-
lating to Deeds), providing that instruments pur-
porting to convey or encumber real property which
have been recorded in the proper auditor's office

shall ''impart the same notice to third persons from
the date of recording as if the instrument had been
executed, acknowledged and recorded in accordance
with the laws regulating the execution, acknowl-
edgment and recording of such instrument then in
force."

II.

Under the head of 'THIRD A," counsel for
appellees discuss the proposition that the mortgage,
even if entered as a real estate mortgage, is void
as a chattel mortgage because not recorded as a
chattel mortgage in the ofRce of the Auditor of
Pacific County, Washington.

In the Session Laws of 1899, page 158, Section
2 of "an act relating to chattel mortgages and the
filing thereof, and repealing all laws in conflict
therewith," the Legislature, referring to chattel
mortgages, uses the following:

"Sec. 2. Every such instrument within ten days
from the time of the execution thereof shall be filed
in the office of the county auditor of the county in
which the mortgaged property is situated, and such
auditor shall file all such instruments when pre-
sented for the purpose upon the payment of the
proper fees therefor, indorse thereon the time of
reception, the number thereof, and shall enter in a
suitable book to be provided by him at the expense
of his county, with an alphabetical index thereto,
used exclusively for that purpose, ruled into sepa-
rate columns with appropriate heads: 'The time of
filing,' 'Name of Mortgagor,' 'Name of Mortgagee,'

'Date of Instrument,' 'Amount Secured,' 'When
Due' and 'Date of Release.' An index to said book
shall be kept in the manner required for indexing
deeds to real estate, and the county auditor shall
receive for the services required by this act the
sum of fifteen cents for every instrument, and the
moneys so collected shall be accounted for as other
fees of his office. Such instrument shall remain
on file for the inspection of the public."

Sections 3 and 6 of the same Act are as follows :

"Sec. 3. Every mortgage filed and indexed in
pursuance of this act shall be held and considered
to be full and sufficient notice to all the world of
the existence and conditions thereof, but shall cease
to be notice, as against creditors of the mortgagors
and subsequent purchasers and mortgagees in good
faith, after the expiration of the time such mort-
gage becomes due, unless before the expiration of
two years after the time such mortgage becomes
due the mortgagee, his agent or attorney shall
make and file as aforesaid an affidavit setting forth
the amount due upon the mortgage, which affidavit
shall be annexed to the instrument to which it re-
lates and the auditor shall endorse on said affidavit
the time it was filed."

"Sec. 6. That a mortgage given to secure the
sum of $300 or more, exclusive of interest, costs
and attorneys or counsel fees, may be recorded and
indexed with like force and effect as if this act
had not been passed, but such mortgage or a copy
thereof must also be filed and indexed as required
by this act."

The Supreme Court of the State of Washington
in the case of Averill v. Allbritton, 51 Wash. 30,
in construing a chattel mortgage securing a note

for $800, held that the copying of the mortgage
upon the records as in the case of a real estate
mortgage is not required, but that placing it on
file and indexing it in the Auditor's office was
sufficient. See opinion, page 32. In the case of
Mills V. Smith, 177 Fed. 652, this court, referring
to the Act of 1899 just above referred to, says:

"The Act of 1899 provides for the filing of chattel
mortgages within ten days from the execution
thereof and the indexing of the same, and declares
that such filing and indexing shall be considered
sufficient notice to the world. * * * Its pur-
pose was to dispense with the necessity of record-
ing chattel mortgages and to substitute a different
registration therefor, leaving it optional with the
mortgagee to record mortgages of $300.00 and
more in accordance with the prior act, in addition
to filing them in accordance with the law."

It is obvious that Section 6 quoted above merely
preserves the right formerly enjoyed by mortgagees
of recording their mortgages if over the sum of
$300, but does not make it mandatory. The man-
datory thing required by the Legislature was the
filing and indexing, and not the recording.

The case of Merritt v. Russell, 44 Wash. 143,
cited by respondents, only holds that when property
is moved to another county the appellant must,
under the old act, cause his mortgage to be entered
in the latter county, which had not been done in
the case there under consideration.

The cases found on page 36 of appellees' brief,
in 24, 16 and 8 Washington, were decided prior
to the passage of the Act of 1899 and are not
authority as to its construction.

The case of Fenby v. Hunt, 53 Wash. 127, holds
that it is not necessary to record a chattel mortgage
where the debt secured is less than $300, a propo-
sition to which we take no exception.

THE RIGHTS OF SUBSEQUENT CREDITORS.

Incorporated under this same head, counsel at-
tempt to meet the proposition discussed in our brief,
pages 15 et seq., under the head, "Alleged Defec-
tive Acknowledgment," wherein we sought to dem-
onstrate that under the law as established by our
Supreme Court the trustee in bankruptcy who rep-
resented only creditors who became such subsequent
to the date of the mortgage could not object to its
validity either as a real or a chattel mortgage on
the ground of any alleged defect in the acknowl-
edgment. In our brief we cited Roy v. Scott, 11
Wash. 399, and Urquhart v. Cross, 60 Wash. 249.
Appellees cite Willamette Casket Co. v. Cross etc.,
12 Wash. 190, and Manhattan Trust Co. v. Seattle
Coal & Iron Co., 16 Wash. 499.

It must be conceded that it is hard to reconcile
these cases. In the case of Roy v. Scott, the Su-
preme Court had before it a question in all essential
respects identical with the question now before the

court. Roy & Co. sought to foreclose a mortgage
on the property of Scott Hartley & Co. McNaught
was a subsequent purchaser who had recovered a
judgment. The position of McNaught is similar
to the position of the trustee who represents the
general creditors, who, under the bankruptcy law,
may be considered to have reduced their claims to
judgment.

The Supreme Court first holds that since the
president and secretary are the only stockholders
of the corporation, and are the persons who exe-
cuted the instrument, the mortgage is good as
against the corporation. (Opn. 403.) The court
then expressed its views as follows:

''Appellant McNaught, not only had no interest
in or lien upon the property at the time that the
mortgage and bill of sale in question were given,
but the court has found that he was not at that
time a creditor, and that there was no actual fraud
in the transaction itself. Hence he clearly is not
in a position to void the transaction. * * *
The statute makes the chattel mortgage (unaccom-
panied by the affidavit) void only as against cred-
itors of the mortgagor or subsequent purchasers and
encumbrancers of the property for value and in
good faith. The word 'subsequent' relates, not to
creditors, but to purchasers and encumbrancers.
Between the mortgagor and mortgagee the instru-
ment was valid and binding as a mortgage without
the affidavit, and McNaught, being at this time a
mere stranger to the property and having no in-
terest in it, cannot invoke the aid of the statute,
v/hich favors a class to which he does not belong."

The next case in point of time in which the
Supreme Court considered the statute requiring the
acknowledgment and recording of a chattel mort-
gage is in the case of Willamette Casket Co. v.
Cross, 12 Wash. 190. The mortgage there in ques-
tion was executed and delivered on the 22nd day
of December, 1893, and not recorded until the
fourth day of May, 1894. Between those dates the
mortgagor had become indebted to creditors repre-
sented by the receiver, who on their behalf resisted
the foreclosure of the mortgage. No reference is
made to the prior case of Roy v. Scott, and if the
Supreme Court intended to overrule the then exist-
ing doctrine they failed to make it clear.

The specific contention of the mortgagee seems
to have been that only creditors who had a specific
lien could resist the foreclosure. The Supreme
Court overruled that contention, and in doing so
used the language quoted in the appellees' brief.
It is to be noted that this case was decided on a
state of facts where the creditors had advanced
moneys on the faith of unencumbered ownership
of property in the mortgagor, there having been
a total failure to record until after the moneys were
advanced. On equitable principles constructive fraud
might have been deduced from this fact, and the
decision of the Supreme Court sustained on that
ground alone. The language of the Supreme Court
summarizing its decision was as follows:

"The language of the statute and these authori-
ties satisfy us that it was the intention of the
Legislature to give no preference to a chattel mort-
gagee over the claims of creditors who should be-
come such after its execution, unless it was re-
corded ivithin a reasonable time after its execution.''

The next case considered by the Supreme Court
is Manhattan Trust Co. v. Seattle Coal & Iron Co.,
16 Wash. 499. This case involves priority of rights
between a real and chattel mortgage not recorded
as a chattel mortgage and without any affidavit
of good faith, and issued to and held by the stock-
holders of the corporation on the one side, and
creditors whose position as prior or subsequent
creditors we are unable to ascertain from the
opinion. The court holds that the burden of show-
ing knowledge of the unrecorded mortgage upon
the creditors is on the mortgagee. We do not be-
lieve the case is entitled to serious consideration in
determining the question now before the Court.

The last case passed upon by our Supreme Court
is Urquhart v. Cross, 60 Wash. 249. This is the
last expression of the Supreme Court on the ques-
tion and it quotes approvingly, and follows Roy v.
Scott, 11 Wash. 399. The mortgage therein issued
was not acknowledged and had no affidavit of good
faith. After the date of the mortgage, the mort-
gagor incurred certain unsecured obligations on
which suit was brought and writs of attachment
issued and levied on the property in controversy.
Prior to the levy the mortgagor had transferred

his rights in the property to the mortgagee in sat-
isfaction of the debt, and the mortgagee had taken
possession. It was contended that for want of any
acknowledgment or affidavit of good faith the mort-
gage was absolutely void as to the subsequent cred-
itor Stever. The court then fully reviewed Roy v.
Scott, and quoted iuWy from it, and then concluded :

'^ Under this ruling the mortgage held by respon-
dent was undoubtedly valid as against the appel-
lant Stever, who had obtained no lien before the
respondent had obtained possession and asserted
title."

We insist that the Supreme Court ruling of Roy
V. Scott has become the rule of property in this
state, and its authority is unimpaired by anything
which the Supreme Court has said subsequently
thereto. In fact, by the most recent expression of
the Supreme Court its authority is reinforced, and
under it the creditors now claiming under the
trustee in bankruptcy are not in a position to take
advantage of the highly technical points insisted
upon by the trustee.

III.

It seems from the appellees' discussion under the
head of THIRD B that we did not succeed in making
our position clear as to the rights of the trustee in
bankruptcy, although beginning on page 15 of our
brief we attempted to do so. It seems to us clear
that under Section 47a as amended by the Act

of 1910, the trustee in bankruptcy has all the rights,
but no more than all the rights, which the creditors
whom he represents would have had in the absence
of bankruptcy, and assuming that these creditors
reduced their claims to judgment, or otherwise by
legal or equitable proceedings obtained a lien. The
statute is so clear that it does not seem that much
discussion would be required on this point. The
cases relied upon by appellees under the head of
THIRD B neither narrow nor amplify the rule
which we stated in our brief. If the creditors
represented by the trustee are none of them in
position to resist the mortgage, and if none of them
could get in position in the absence of bankruptcy
proceedings to attack the mortgage, it is difficult
to see how the trustee can do so. See Collier, Bank-
ruptcy, 9th Edition, p. 659 et seq., for full dis-
cussion, with cases.

We conceive the rule to be that we are no better
off because of the appointment of a trustee in bank-
ruptcy in asserting our rights under the mortgage,
but we think it equally clear that we are no worse
off.

If there were no bankruptcy proceedings, the
most the creditors could do under this state law
would be reduce their claims to judgment, levy
execution and sell the property. They would then
acquire exactly the rights which their judgment
debtors have and would not be bona fide purchasers.

Dawson v. McCarty, 21 Wash. 314, and other
cases cited on page 22 of our brief.

IV.

Under the figure 14, on page 7 of their brief,
appellees claim that Heath and Leach were not
the sole owners of the stock of the corporation at
the time of the execution of the mortgage, but that
Effie McKenzie was the owner of an undivided one-
half interest in 40 shares. Inasmuch as it clearly
appears that Mrs. McKenzie's rights were equitable
only, and that on the books of the company the
stock stood in Heath's name, and that Effie Mc-
Kenzie thereafter obtained judgment, not for the
stock, but for the conversion of the stock, there is
nothing in that situation which would militate
against our position that the corporation is estopped
by the act of the president and secretary, both the
members of the board, and all the record stockhold-
ers, in executing this mortgage, and in accepting
and retaining the benefit thereof.

On the affidavit of Samuel McMurran appellees
assert that the indebtedness to the Pacific State
Bank was a pre-existing indebtedness. McMurran
deduces this conclusion from an audit made by him
of the books of the Raymond Box Company, and
he does not allege any personal knowledge of the
facts.

Paragraph 3 of the petition of the Pacific State

Bank initiating this proceeding begins as follows:
'That heretofore, and on or about the second day
of December, 1910, the petitioner loaned to the
bankrupt the sum of $23,400," in consideration of
which the note was given and the mortgage exe-
cuted. This paragraph is specifically admitted by
the answering creditors. (Transcript, p. 30.)

The affidavit of Miles Leach, page 59, Transcript,
is "that on or about the 2nd day of December,
1910, said Raymond Box Co. became indebted to
the Pacific State Bank of South Bend in the sum
of $23,400," etc., said indebtedness being identified
as the same indebtedness now in question. Leach
was the secretary of the company and familiar with
its books and affairs, and makes affidavit that he
knows approximately the date (when) the indebt-
edness due each creditor was contracted.

The positive allegation of the petitioner and the
explicit admission of the answering creditors and
the positive affidavit of the secretary, who had actual
knowledge of the affairs of the company and the
dates when the indebtedness was incurred, all cor-
roborate the presumption of law that the indebted-
ness was incurred at the date of the note, and if
the point is material, which we doubt, we think
the court would not be justified in finding that any
part of the indebtedness was incurred prior to the
date of the note and mortgage.

This is the view of the facts taken by Hon. C.
H. Hanford, Judge, in deciding the case (Trans.,
page 102) :

''In my study of the case I did not fail to notice
the important facts that the claim of the bank is
for a bona fide debt due and owing to it by the
bankrupt corporation; that credit was given by the
bank to the corporation in reliance upon the instru-
ment purporting to be a mortgage which the parties
thereto believed to have been executed with due for-
mality and constituted a valid lien; that it is con-
ceded by all the litigants in this case that said
instrument was in fact signed, sealed with the cor-
porate seal, acknowledged, certified, delivered and
recorded at the times and in the manner indicated
by the instrument itself and the endorsements there-
on," etc.

We respectfully insist that the error of the court
below is apparent and should be reversed.
Respectfully submitted,
H. W. B. HEWEN,
MAURICE A. LANGHORNE,
ELMER M. HAYDEN,

Attorneys for Appellant.

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